`[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]





                     THE SEMI-ANNUAL REPORT OF THE
                BUREAU OF CONSUMER FINANCIAL PROTECTION

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 14, 2023

                               __________

       Printed for the use of the Committee on Financial Services



                           Serial No. 118-32





















                             _________
                              
                 U.S. GOVERNMENT PUBLISHING OFFICE
                 
53-180 PDF               WASHINGTON : 2023 




















                 HOUSE COMMITTEE ON FINANCIAL SERVICES

               PATRICK McHENRY, North Carolina, Chairman

FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California, Ranking 
PETE SESSIONS, Texas                     Member
BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas                AL GREEN, Texas
FRENCH HILL, Arkansas                EMANUEL CLEAVER, Missouri
TOM EMMER, Minnesota                 JIM A. HIMES, Connecticut
BARRY LOUDERMILK, Georgia            BILL FOSTER, Illinois
ALEXANDER X. MOONEY, West Virginia   JOYCE BEATTY, Ohio
WARREN DAVIDSON, Ohio                JUAN VARGAS, California
JOHN ROSE, Tennessee                 JOSH GOTTHEIMER, New Jersey
BRYAN STEIL, Wisconsin               VICENTE GONZALEZ, Texas
WILLIAM TIMMONS, South Carolina      SEAN CASTEN, Illinois
RALPH NORMAN, South Carolina         AYANNA PRESSLEY, Massachusetts
DAN MEUSER, Pennsylvania             STEVEN HORSFORD, Nevada
SCOTT FITZGERALD, Wisconsin          RASHIDA TLAIB, Michigan
ANDREW GARBARINO, New York           RITCHIE TORRES, New York
YOUNG KIM, California                SYLVIA GARCIA, Texas
BYRON DONALDS, Florida               NIKEMA WILLIAMS, Georgia
MIKE FLOOD, Nebraska                 WILEY NICKEL, North Carolina
MIKE LAWLER, New York                BRITTANY PETTERSEN, Colorado
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director  
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 14, 2023................................................     1
Appendix:
    June 14, 2023................................................    77

                               WITNESSES
                        Wednesday, June 14, 2023

Chopra, Rohit, Director, Consumer Financial Protection Bureau 
  (CFPB).........................................................     5

                                APPENDIX

Prepared statements:
    Chopra, Rohit................................................    78

              Additional Material Submitted for the Record

Barr, Hon. Andy:
    Written statement of the Association of Credit and Collection 
      Professionals (ACA)........................................    82
    Letter to Rohit Chopra from Representatives Barr and Huizenga 
      re: Freedom of Information Act (FOIA) requests, dated June 
      14, 2023...................................................    87
    Written statement of the Consumer Bankers Association........    89
    Writtten statement of the Credit Union National Association 
      (CUNA).....................................................    93
Garcia, Hon. Sylvia:
    Letter to the CFPB from the Consumer Bankers Association, 
      dated July 2, 2018.........................................   101
    Consumer Bankers Association White Paper, ``The Case for 
      Regulation Through Rulemaking & Guidance,'' dated October 
      2021.......................................................   106
Velazquez, Hon. Nydia:
    Excerpt from House Small Business Committee hearing on March 
      28, 2023...................................................   114
Waters, Hon. Maxine:
    Written statement of the Asset Building Policy Network (ABPN)   118
    ``Who Opposes the Fifth Circuit Decision in CFSA vs. CFPB?...   121
    Written statement of UnidosUS................................   124
Chopra, Rohit:
    Written responses to questions for the record from 
      Representative Barr........................................   132
    Written responses to questions for the record from 
      Representative Davidson....................................   157
    Written responses to questions for the record from 
      Representative De La Cruz..................................   158
    Written responses to questions for the record from 
      Representative Donalds.....................................   163
    Written responses to questions for the record from 
      Representative Flood.......................................   208
    Written responses to questions for the record from 
      Representative Garbarino...................................   212
    Written responses to questions for the record from 
      Representative Hill........................................   213
    Written responses to questions for the record from 
      Representative Houchin.....................................   215
    Written responses to questions for the record from 
      Representative Kim.........................................   219
    Written responses to questions for the record from 
      Representative Nunn........................................   225
    Written responses to questions for the record from 
      Representative Pettersen...................................   236
    Written responses to questions for the record from 
      Representative Sherman.....................................   238
    Written responses to questions for the record from 
      Representative Steil.......................................   243
    Written responses to questions for the record from 
      Representative Timmons.....................................   246
    Written responses to questions for the record from 
      Representative Velazquez...................................   250

 
                       THE SEMI-ANNUAL REPORT OF 
                         THE BUREAU OF CONSUMER 
                          FINANCIAL PROTECTION 

                              ----------                              


                        Wednesday, June 14, 2023

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:04 a.m., in 
room 2128, Rayburn House Office Building, Hon. Andy Barr 
presiding.
    Members present: Representatives Sessions, Posey, 
Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, Hill, 
Emmer, Loudermilk, Mooney, Davidson, Rose, Steil, Timmons, 
Norman, Meuser, Fitzgerald, Garbarino, Kim, Donalds, Flood, 
Lawler, Nunn, De La Cruz, Houchin, Ogles; Waters, Velazquez, 
Sherman, Meeks, Scott, Lynch, Green, Cleaver, Himes, Foster, 
Beatty, Vargas, Gottheimer, Casten, Pressley, Horsford, Tlaib, 
Torres, Garcia, Nickel, and Pettersen.
    Mr. Barr. [presiding]. The Financial Services Committee 
will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``The Semi-Annual Report of 
the Bureau of Consumer Financial Protection.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    Thank you, Director Chopra, for being here today. As the 
Director, you wear a lot of hats. You are a member of the 
Federal Deposit Insurance Corporation (FDIC) and the Financial 
Stability Oversight Council (FSOC).
    This committee has spent a lot of time understanding how 
regulators reacted to the failures of Silicon Valley Bank and 
Signature Bank. Given that both the FDIC and FSOC played 
critical roles in those failures, I am looking forward to 
hearing about your involvement in the decision-making process.
    As we said when FDIC Chair Gruenberg and Federal Reserve 
Vice Chair Barr testified before this committee, there was and 
continues to be a lack of transparency surrounding the 
regulators' decision-making that first weekend in March. Was 
there an ideological lens that impacted your response? Did your 
views regarding bank consolidation lead to a delayed resolution 
and greater uncertainty in the financial sector? Let's spend 
more time on this when we get to questions.
    Turning today to your job as Director of the Consumer 
Financial Protection Bureau (CFPB), your agency is responsible 
for regulating and enforcing consumer financial laws. Clear 
rules and expectations of how to comply with those rules 
benefit all participants in the consumer financial marketplace.
    Unfortunately, under your leadership, the CFPB is doing the 
exact opposite. First, your agency identifies consumer harm in 
one instance for a specific product. From there, you 
extrapolate that that harm occurred everywhere and everyone 
should be under suspicion. In fact, every act is presumed 
abusive until the CFPB or a court decides maybe they aren't.
    You use compliance bulletin circulars and advisory opinions 
to sow doubt and confusion in the marketplace. You vilify 
entire industries simply because they are politically unsavory, 
in your opinion. The practice of name-and-shame first, verify 
later, isn't consumer protection. It is McCarthyism. This harms 
consumers and the economy at large while propping up trial 
lawyers and consumer activist groups. Let me be clear: That is 
not the mission of the CFPB.
    Finally, I will turn to what appears to be your most-recent 
appointment as an appendage of President Biden's re-election 
campaign. When the President started talking about junk fees, 
the current hyperpartisan CFPB engaged in a campaign about its 
effort to clamp down on--you guessed it--junk fees.
    Look, it is an easy target. No one likes fees. And to be 
clear, some fees should be questioned to ensure that people are 
not getting ripped off. But to indiscriminately label fees as 
abusive is a blatant attempt to pander to Americans who have 
been hung out to dry in the Biden economy.
    My Democratic colleagues will likely turn to their favorite 
talking point, corporate greed, to explain away the need for 
fees. But do you know who else relies on fees? The government. 
The IRS charges late fees on taxpayers. If you want to enter 
most national parks, you pay a fee. Even the CFPB charges fees 
on Freedom of Information Act (FOIA) requests. So why would the 
CFPB believe that the same costs that these fees cover or the 
actions they are designed to deter do not exist in the private 
sector?
    I will finish with this. The current CFPB operates in an 
opaque, increasingly-partisan, and analytically-weak manner. We 
experienced this under Director Richard Cordray, and his legacy 
lives on with you, Director Chopra.
    The CFPB is directly overstepping its bounds and serving as 
judge, jury, and executioner in the consumer financial 
marketplace. That is why committee Republicans advanced a 
package of bills to reform the structure and funding stream of 
the CFPB to ensure transparency and accountability to the 
American people.
    And let me just say one thing about the rulemaking on 
credit cards. I want you to talk about this, Director, because 
we don't understand how it is protecting consumers to force a 
subprime credit card borrower who is always on time and never 
pays late--which is 74 percent, according to your own data; 74 
percent of Americans who have credit cards never pay late--to 
pay a higher interest rate by lowering the late fees on 
borrowers who never pay late?
    And with that, I yield back my time.
    And I now recognize the ranking member of the committee, 
the gentlewoman from California, Ms. Waters, for 4 minutes for 
an opening statement.
    Ms. Waters. Thank you very much.
    Good morning, and welcome, Director Chopra. I am so pleased 
that you are here this morning to share with us the success and 
all of the good that your group has been doing, as we 
predicted, instead of focusing on how we can strengthen 
consumer protections and avoid a catastrophic default of jobs.
    Republicans are focused on undermining the CFPB, the only 
Federal agency with the singular mission of protecting 
consumers. As we speak, extreme MAGA Republicans are teaming up 
with predatory payday lenders to challenge the 
constitutionality of the CFPB's funding in the Supreme Court, 
based on a fringe legal theory.
    Every single other court has affirmed the validity of the 
CFPB's funding, but just like MAGA Republicans who continue to 
deny election results, they are continuing to deny these facts, 
also.
    So, let me state the facts simply. The Constitution is 
clear. Congress can fund the Executive Branch, including the 
CFPB, banking regulators, and other agencies however it likes 
and has done so for nearly 250 years. This attack on the CFPB 
is yet another destructive effort by Republicans to undermine 
all types of government programs, including and especially 
Social Security and Medicare.
    Let's take a look at last month. I was proud to lead an 
amicus brief with 144 current and former Members of Congress 
supporting the CFPB against this reckless challenge. 
Republicans are also advancing legislation to undermine the 
operations of the CFPB. These efforts are a direct attack on 
consumers and the safeguards that protect them in our nation's 
ever-evolving financial system.
    Despite these attacks, the CFPB's record under Director 
Chopra speaks for itself. The CFPB has successfully combated 
junk fees, relieved the burden of medical debt on consumers 
credit reports, fought back against housing discrimination and 
redlining, and held large financial institutions like Wells 
Fargo accountable for repeatedly breaking the law and harming 
people across America.
    In fact, the CFPB has returned more than $17 billion to 200 
million harmed customers. That is why 80 percent of people, 
including 75 percent of Republicans, support the CFPB and want 
the agency to continue to do its job. Republicans should start 
listening to their constituents, who can tell them what a junk 
fee is and explain why they need to support this critical 
agency's work.
    Additionally, the CFPB's new small business lending rule 
implementing Section 1071 of the Dodd-Frank Act will go a long 
way toward finally rooting out discrimination in small business 
lending. It will open up new funding opportunities to help 
small businesses start up, grow, and thrive. It will do this in 
part by tracking data of minority- and women-owned businesses, 
as well as LGBTQ+-owned businesses, which we are especially 
focused on during pride month.
    Democrats will reject Republican efforts to use the 
Congressional Review Act to eliminate this long-overdue rule, 
while Republicans refuse to stand up for consumers, including 
LGBTQ+ small business owners. They continue to protect the 
interests of large corporations.
    I yield back.
    Mr. Barr. The gentlelady's time has expired.
    The Chair now recognizes Mr. Loudermilk, who is also the 
Vice Chair of our Subcommittee on Financial Institutions and 
Monetary Policy, for 1 minute.
    Mr. Loudermilk. Thank you, Mr. Chairman.
    And thank you, Director Chopra, for once again coming to 
speak with us this morning.
    Unfortunately, since the last time you were here, it 
doesn't seem like much has changed. The CFPB is still an 
unaccountable agency with centralized leadership in a 
constitutionally-questionable funding structure. The Supreme 
Court is currently looking into the latter, and I am hopeful 
their decision will show us a path forward for the agency under 
regular appropriations.
    Industry feedback has been near unanimous that the Bureau 
is acting with little to no regard for the downstream effects 
of their rulemaking on consumers or small businesses.
    Through its wide-reaching disclosure rules, industry 
circulars, and opinions issued across various media, including 
enforcement, the CFPB has collected a wealth of consumer data. 
And in March of this year, we were informed of a significant 
breach at the Bureau that compromised data belonging to 
hundreds of thousands of consumers. This raises important 
questions over whether Congress and the American people can 
trust the Bureau to look out for their own best interests if 
they are not even willing to protect the information they 
collect.
    The Consumer Financial Protection Bureau is deeply flawed, 
deeply troubled, and in desperate need of reform. The best time 
to hold the Bureau accountable is not today; it was 12 years 
ago.
    Mr. Barr. The gentleman's time has expired.
    Mr. Loudermilk. But the second-best time is today.
    Mr. Barr. The gentleman's time has expired.
    The Chair now recognizes the ranking member of the 
Subcommittee on Financial Institutions and Monetary Policy, Mr. 
Foster, for 1 minute.
    Mr. Foster. Thank you, Mr. Chairman, and Director Chopra, 
thank you for being here today.
    In an era where consumer financial transactions have become 
increasingly complex and oftentimes daunting, the CFPB serves 
as a beacon of protection, ensuring that individuals are 
treated fairly in the marketplace, a real example of government 
doing things to make people's lives better.
    As our technology and ability to transact gets faster and 
more efficient, so do the scams and elaborate fraud schemes 
that wish to take advantage of our constituents.
    The CFPB protects the most-sensitive parts of our 
population. You are focused on the protection of older adults, 
and on vulnerable groups from servicemembers to LGBTQ+ 
individuals, and your partnership with advocacy organizations 
and your actions against companies violating laws protecting 
servicemembers and others demonstrates your dedication to 
safeguarding those who may be more susceptible to financial 
exploitation. And it does all of this while coming under 
constant attack.
    With the coming onslaught of deep-fake AI impersonation and 
the opaque ChatGPT robo advisors, your job will not get easier.
    So thank you, and I yield back.
    Mr. Barr. The gentleman's time has expired.
    Today, we welcome the testimony of the Honorable Rohit 
Chopra, Director of the Consumer Financial Protection Bureau.
    Director Chopra, we thank you for your time, and we will 
recognize you for 5 minutes to give an oral presentation of 
your testimony. And without objection, your written statement 
will be made a part of the record. You are now recognized for 5 
minutes.

    STATEMENT OF ROHIT CHOPRA, DIRECTOR, CONSUMER FINANCIAL 
                    PROTECTION BUREAU (CFPB)

    Mr. Chopra. Chairman Barr, Ranking Member Waters, and 
members of the committee, thank you for holding this hearing 
today.
    I am pleased to report that the CFPB continues to deliver 
tangible results for the public, ensuring that consumers are 
protected, ensuring that honest businesses are safeguarded, and 
preparing for the future as Big Tech and artificial 
intelligence reshape the industry.
    I want to share a few observations about the state of 
household balance sheets in the United States as well as some 
highlights of our work.
    American families continue to benefit from a resilient 
labor market. Consumer spending is quite robust, and borrowing 
has accelerated. Inflation in key categories such as vehicles 
and others has contributed to rising levels of household debt. 
Americans now own $17 trillion in mortgages, auto loans, 
student loans, credit cards, and other consumer loans. Rates 
are higher than they were a few years ago, and some families 
are paying much more.
    Overall, current indicators of distress on consumer credit 
remain fairly muted, although there are modest signs of 
increased delinquency. We will continue to monitor the impact 
of changes in interest rates and home prices closely as well as 
other changes that might impact large segments of the 
population.
    We are 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 
that policymakers need to take steps to avoid the need for 
emergency measures in the future.
    With respect to congressional directives, the CFPB has made 
major progress on proposing, finalizing, or implementing 
required rules on credit reporting for survivors of human 
trafficking, small business lending data, PACE lending, the 
LIBOR transition, and more.
    We are reviewing old rules to find opportunities to 
simplify and future-proof them. We built on the work of my 
predecessor to publish more advisory opinions and guidance that 
helps 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 subject to the same 
oversight as local banks and credit unions. We are activating 
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 actors and putting more attention on large 
and repeat offenders. And since then, we have recovered $4.6 
billion in refunds and penalties. We are handling an average of 
10,000 consumer complaints per week and obtaining successful 
resolutions for individuals outside of legal proceedings.
    But equally important is our work to address how technology 
is transforming financial services. I think the U.S. has a 
choice. Are we going to harness technology to maintain and 
enhance relationship banking, drive more competition, and 
protect privacy? Or will we continue our lurch towards a system 
marked by surveillance that is fully-automated and controlled 
by just a handful of 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 financial data.
    We have been leading a number of efforts in artificial 
intelligence, and we are working to bring more technical talent 
inside the agency. We are taking steps to guard against 
algorithmic bias, and we are working to ensure that data 
brokers respect long-standing laws on the books.
    The work of the CFPB in an age of Big Tech and artificial 
intelligence has never been more important.
    Thank you, Chairman Barr, for the opportunity to appear 
before you. I look forward to your questions.
    [The prepared statement of Director Chopra can be found on 
page 78 of the appendix.]
    Mr. Barr. Thank you, Director Chopra.
    And I will now yield myself 5 minutes to ask some 
questions.
    As an FDIC Board Member, you were involved in the decision-
making related to Silicon Valley Bank and its resolution. 
During the weekend of March 9th, did you express any views to 
FDIC Chairman Gruenberg, any member of the FDIC Board of 
Directors, any FDIC staff, or any officials in the 
Administration regarding the class of banks that should or 
should not be considered as a viable buyer of Silicon Valley 
Bank?
    Mr. Chopra. No. In a bank failure particularly, the most-
efficient way to contain any fallout is to ensure there is 
continuity. The Bank Merger Act specifically talks about 
financial stability. It was important if we had a viable buyer.
    Mr. Barr. Did you express an opinion that a large Wall 
Street, too-big-to-fail bank should not be in the class of 
institutions that would be eligible to purchase the bank?
    Mr. Chopra. I think we would have taken any potential 
buyer.
    Mr. Barr. Okay.
    Mr. Chopra. We did not receive a bid.
    Mr. Barr. Okay. I appreciate your answer.
    And I ask because when you were FTC Commissioner, you 
submitted a comment to DOJ on bank mergers, criticizing those 
that occurred during the 2008 financial crisis. You opined 
that, ``Policymakers compounded the damage by orchestrating 
several more megamergers, forming even bigger banks.'' We also 
know you used procedural games in December 2021 to try to force 
a bank merger process review.
    Did you see the Silicon Valley Bank failure as an 
opportunity to take your personal views on megamergers, and 
implement them in a real-world crisis?
    Mr. Chopra. No. But what you are referring to, I talk about 
where there is tremendous government assistance. It was a 
different situation. We were faced with one of the fastest bank 
failures in history.
    Mr. Barr. Director, one more time, did you in any way try 
to influence the FDIC analysis of the bids?
    Mr. Chopra. We did not receive any bids that weekend for 
Silicon Valley Bank. We sought to get as many bids as possible. 
The FDIC's law requires minimizing costs to the Deposit 
Insurance Fund (DIF), and that is what we did.
    Mr. Barr. We talked a little bit about this offline, that 
some healthy mergers can avoid losses to the DIF. I want you to 
take that back to Chairman Gruenberg, that we need a better 
merger process to avoid losses to the DIF. And we can talk 
about that further.
    Director Chopra, in your new abusive acts and practices 
policy statement, do you include the following as fitting into 
what will now be considered abusive and a violation of consumer 
financial law? And I will ask that you answer yes or no.
    A pop-up or drop-down box?
    Mr. Chopra. I don't believe that, on its own, is any 
violation.
    Mr. Barr. Okay. Multiple click-throughs?
    Mr. Chopra. I don't believe that, on its own, is any 
violation. I think there was a series of examples used to look 
at material interference.
    Mr. Barr. What about consumer confusion?
    Mr. Chopra. That is part of the statutory----
    Mr. Barr. What if it is unreasonable consumer confusion?
    Mr. Chopra. Unreasonable on the part of the consumer----
    Mr. Barr. On the part of the consumer.
    Mr. Chopra. ----would not be the issue. That would not meet 
the statutory standard. The standard has two prongs with some 
sub-prongs. One is material interference with the consumer's 
ability to navigate, and the second is taking unreasonable 
advantage----
    Mr. Barr. What about customer support taking too long? Is 
that abusive?
    Mr. Chopra. Is that in the proposed----
    Mr. Barr. See, your confusion is the problem. Nobody knows 
what constitutes, ``abusive.'' We still don't. If you don't 
know, and you are the Director, and you issue the guidance----
    Mr. Chopra. We have sought in the proposed policy statement 
to summarize all of the supervisory actions by State and 
Federal law as well as enforcement to say, this is the body of 
law we have. We have a common law system in the United States. 
We are seeking to provide as much clarity to be responsive to--
--
    Mr. Barr. Because I have limited time, these are examples 
that you say that you are listing, and you can't tell me 
whether or not these examples constitute, ``abusive.'' And 
complying with these new additions, these examples to the, 
``abusive'' prong, means that companies will now have to change 
the way they present information or manage customer services. 
This means that these institutions have new obligations, and 
you are not following notice-and-comment rulemaking, and you 
are imposing new requirements on them by listing these----
    Mr. Chopra. I completely disagree with that 
characterization, respectfully.
    Mr. Barr. I know you do.
    If it is not new requirements, here is the problem. It is 
kind of like Supreme Court Justice Potter Stewart in 1964 when 
he was asked to describe his test for obscenity. He said, ``I 
know it when I see it.''
    This vague and ill-defined guidance on what, ``abusive,'' 
means under Unfair, Deceptive, or Abusive Acts of Practices 
(UDAP) sounds a lot like Justice Stewart's test for obscenity. 
``Abusive'' is whatever you say it is.
    Mr. Chopra. It is not. Congress wrote the words. It is in 
statute. We have tried our very best to be able to articulate 
with fidelity to those words, to give examples and facts.
    Mr. Barr. My time has expired. You tried, but respectfully, 
I think you failed. Nobody knows what it is. It is what you say 
it is, and that is the problem.
    My time has expired. The ranking member of the committee, 
the gentlewoman from California, Ms. Waters, is recognized.
    Ms. Waters. Yes, your time has expired. And I certainly 
hope that you recognize that as I start with my questions.
    First of all, I want to go back to what the gentleman was 
implying when he asked you about what you said. Whatever you 
said had nothing to do with what the final results were that 
were accomplished when we were able to save this country from 
bank runs, et cetera.
    Would you like to take a moment to talk about how 
successful we were when, over 48 hours, you all worked very 
hard to ensure that when we woke up on Monday morning, the 
banks would be safe and secure, and that, again, they would not 
be bankrupt? Give America some examples of the fine work that 
was done.
    Mr. Chopra. I think what happened that weekend was 
something we should never want to repeat and have to do again. 
We had to take emergency steps. The unanimous vote of the Fed 
Board and the FDIC Board, with the concurrence of the Treasury 
Secretary and the President, was to insure uninsured deposits. 
It was extraordinary, and it is something we do not want to 
have to repeat. It was one of the fastest bank runs in history 
pushed digitally; social media in the modern age was involved.
    We are going to have to take steps to make sure that 
financial institutions can stay resilient even in these times 
of stress. I also think it woke people up to uninsured 
deposits, and there are more places where these uninsured 
deposits exist for consumers, and we need to make sure people 
know how to keep their money safe.
    Ms. Waters. I thank you very much for reminding this 
committee of the good work that our government did in order to 
ensure that our banks are safe and secure.
    I want to go to a question that I think needs to be given 
some explanation. I applaud you and the CFPB staff for issuing 
long-overdue rules implementing Section 1071 of Dodd-Frank to 
provide transparency to the small business lending market. I 
worked with Congresswoman Velazquez and others to ensure that 
this measure was included in Dodd-Frank so that the same kind 
of transparency in market lending could be made in small 
business lending.
    My colleagues on the opposite side of the aisle are quick 
to point to the burdens of data collection on lenders. Would 
you discuss how you took the concerns of small community banks 
and credit unions into account in the final rule?
    Mr. Chopra. We made substantial changes from the proposal, 
including changing thresholds, which actually led, I believe, 
to 2,000 of the smallest banks which do not do much small 
business lending, to not have to report.
    We also changed the implementation period so the large ones 
would go first with much more time for the smaller ones. We 
sought to simplify. The final rule allows small banks and 
others to work together with their industry associations to 
help with reporting. We did a lot to make changes, but we had 
to implement the statute as the court directed.
    Ms. Waters. Thank you. Now, would you also discuss the 
benefits that small businesses of all types will see from this 
rule, particularly for LGBTQ small businesses? And will 
transparency in this opaque market help make the market more 
competitive and reduce costs for all small businesses?
    Mr. Chopra. Certainly, the Paycheck Protection Program 
(PPP) was a real sign that the government really lacked, and 
the market also lacked details about patterns of small business 
lending. We see that with more mortgage data, you actually 
invite smaller players to enter the market to fit unmet needs.
    I hope this dataset is going to be able to be used also to 
identify opportunities, meet needs, and really work together 
with other rules that are currently on the books, with which 
people can achieve compliance.
    Ms. Waters. Thank you. One thing I am focused on is getting 
more information about the type of government programs 
supporting small businesses, including Small Business 
Administration (SBA) loans, and loans from Community 
Development Financial Institutions (CDFIs). I believe this kind 
of data would help Congress to better understand the full 
impact of these various programs that have been supporting 
small businesses in underserved rural and urban areas and to 
help us to strengthen them.
    Do you agree?
    Mr. Chopra. Yes.
    Ms. Waters. If so, would you work with me on how best to 
design such a requirement?
    Mr. Chopra. We always want to work with you, Congresswoman. 
Many of those loans may be captured partially, but we will work 
with you.
    Ms. Waters. I thank you very much for your presentation 
here today, and I thank you for always working with us on 
behalf of the people of this country.
    I yield back.
    Mr. Barr. The gentlelady's time has expired.
    The gentleman from Arkansas, Mr. Hill, is recognized.
    Mr. Hill. Thank you, Mr. Chairman.
    Director, we are glad to have you here before the committee 
today. We are doing a lot of work, and we have done that under 
the leadership of former Chairwoman Waters and current Chairman 
McHenry in the whole fintech space and the digital future for 
financial services. It is a major megatrend, of course, across 
the world. And the building blocks of that future digital 
financial services space include cyber protection standards, 
digital identity--a favorite topic of my friend from Illinois, 
Dr. Foster--and privacy.
    And I want to start out our discussion talking about 
Section 1033, the rulemaking that talks about open banking. In 
the last 8 months, the Bureau has released the Small Business 
Regulatory Enforcement Fairness Act (SBREFA) outline. SBREFA is 
the acronym for 1033, which sheds some light into the agency's 
thinking about the advance of a rulemaking, I think, that you 
are considering for October.
    Are you still on track for an October release of that rule?
    Mr. Chopra. Yes, sir.
    Mr. Hill. Data privacy and enshrining consumer data rights 
are a top priority of Chairman McHenry, which is why this 
committee passed our Data Privacy Act a few months ago. So, we 
have a keen interest in your views on open banking in this 
rulemaking.
    I thought it was notable that in your initial proposal, you 
were only covering deposit accounts and card accounts from 
depository institutions, and weren't tackling or applying the 
rule to services provided by nonbanks, even though the Bureau 
acknowledges that nonbank data providers offer numerous 
consumer financial products, including mortgages, auto loans, 
et cetera.
    Can you tell the committee how you reached the decision to 
set the scope only at Reg E and Reg Z for your initial 
proposal?
    Mr. Chopra. Sure. And just to be clear, open banking is 
going to probably be one of the most important things we should 
all work on together. It is basically about the future of 
finance, and how do we shape it in ways that are good for 
consumers, businesses, and others.
    Congressman Hill, we did not just include depository 
institutions. What we said was--we asked industry, asked 
experts, what is the most valuable types of data to get? And 
what they said was, it is transaction data. Cash flow data. So 
by getting all of that transaction account information--and we 
include nonbanks, I believe, in the SBREFA--we got input on 
that because that is what is going to give a mortgage lender, 
an auto lender, or others the ability to say, maybe I shouldn't 
rely on this credit score. Maybe I should look at their actual 
income and expenses.
    I think that is why we started there. I am very open to 
figuring out ways to expand it, and I see this as a sequencing 
just like other jurisdictions in the Organization for Economic 
Co-operation and Development (OECD) have done.
    Mr. Hill. Thanks. We will follow up on that. I want to make 
sure we get this right. This is something on which the 
committee wants to collaborate.
    You also, in your advance notice on SBREFA, did not address 
liability for data breaches or data security noncompliance. a 
key issue that I am going to talk more about if we have time 
remaining. You have gotten a lot of comments on that. Do you 
expect the proposed rule this fall to include addressing 
liability for data breaches?
    Mr. Chopra. Yes. The comments we got--I think institutions 
who are providing information want some understanding that if 
there is mischief on the other side, they won't be held liable. 
When we propose the rule, expect us to address some of that.
    Mr. Hill. Okay. Good.
    Mr. Chopra. So, that we can make it clear for the entities.
    Mr. Hill. And speaking of data breaches, nobody has more 
data breaches than the U.S. Government. It is a huge 
frustration for all of us on this committee, and recently, even 
the CFPB had a former agency employee leak personally 
identifiable information (PII) and confidential supervisory 
information, which could have potentially impacted 250,000 
American consumers and 50 financial institutions.
    And whether it is this breach or the one from Office of 
Personnel Management (OPM) back in 2015, or the Postal Service, 
or the IRS, how in the world can the citizens trust their 
government to keep their private information private?
    Mr. Chopra. Yes. It is an extremely serious situation. We 
were dealing with an insider threat. Our systems were not 
breached or hacked, but we identified indicia that an employee 
had sent some emails to their personal email account. We 
immediately investigated.
    Mr. Hill. Is there monitoring now so you can stop that from 
happening in the future? Or do you now monitor that more 
successfully in the interim?
    Mr. Chopra. Yes, sir. We have already been implementing 
ways to address this. But I will share with you that the issue 
of insider threats is a really serious----
    Mr. Hill. Let me share with you that you and the bank 
regulators make that a living nightmare for every depository 
institution to make sure they do it right through internal and 
external penetration testing, and I think the citizens should 
demand the same of the Federal Government.
    I yield back, Mr. Chairman.
    Mr. Barr. The gentleman yields back.
    The gentlewoman from New York, Ms. Velazquez, is now 
recognized.
    Ms. Velazquez. Thank you, Mr. Chairman, and Ranking Member 
Waters.
    Director Chopra, thank you for being here today.
    I want to say that, along with many of my colleagues, 
especially Ranking Member Waters, I was proud to sign on to the 
amicus brief and support the good work of the CFPB.
    I know that there has been some confusion about the 
Bureau's recent small business lending rule, also known as 
Section 1071, so I would like to clarify a few things. Can you 
tell me why the Bureau is doing this rule now?
    Mr. Chopra. Congress passed it in 2011, and the Bureau did 
not do it, and then a court order demanded the Bureau complete 
it by March 31st, and we did.
    Ms. Velazquez. So it wasn't just the CFPB's idea or your 
idea, Director Chopra?
    Mr. Chopra. It was the Legislative Branch's idea.
    Ms. Velazquez. Isn't it true that there were major 
substantial changes between the regional proposal and the final 
rule based on input from industry stakeholders?
    Mr. Chopra. Yes. And they have acknowledged that we made 
substantial changes, including one that would reduce the number 
of local banks that would have to report. We have tried our 
best to accommodate and figure out a way to achieve the 
statutory objectives, and we tried our best.
    Ms. Velazquez. Okay. Does the CFPB's rule require banks to 
ask customers about their race and ethnicity and sexual 
orientation?
    Mr. Chopra. The statute makes clear that a borrower does 
not need to provide that information. We did publish a sample 
form that institutions can use where borrowers can self-
identify with checkboxes if they would like to, but it is not 
mandatory.
    Ms. Velazquez. And does the rule allow for customers to 
decline to provide that information?
    Mr. Chopra. Absolutely.
    Ms. Velazquez. Aren't you allowing banks to partner with 
other banks and trade associations to fill out and report this 
data?
    Mr. Chopra. Yes. Many of them can use consortia third 
parties. If they don't want to ask, they can direct their 
borrowers to, ``Go fill this out over here.'' There is lots of 
flexibility because we heard those comments and wanted to make 
sure we were responding to them adequately.
    Ms. Velazquez. That all sounds pretty reasonable to me.
    Is it true that smaller banks have more time to comply with 
this rule?
    Mr. Chopra. Yes. We gave substantial extra time compared to 
the proposal for those that were smaller in the marketplace. We 
are actively working with vendors and others to provide and 
partner with them to figure out how to make it as smooth as 
possible.
    Ms. Velazquez. And what else do you do in this rule to ease 
the compliance burden on small banks? Weren't some banks 
exempted completely?
    Mr. Chopra. Yes. We estimate that about 2,000 will not have 
to report under this. We visited with a lot of these 
associations and banks to figure this out. We were, again, 
under a court order to do it. We identified places where we 
could simplify. The way in which we are doing it is going to 
leverage technology. And, again, we understand this will 
require some effort, and we want to work, but we have to 
faithfully implement the law that was passed.
    Ms. Velazquez. Director Chopra, this requirement was 
included in Section 1071 because small business lending data is 
a critical tool to help identify and combat this combination in 
small business lending. Not only that, but this data can 
ultimately help spur investment and programs to support the 
needs of America's small businesses.
    Can you briefly describe what benefits we expect to see 
from this dataset and what benefits we would have seen if these 
had been in place several years ago, as Congress originally 
intended?
    Mr. Chopra. I think due to the fact that this was delayed 
so long there has been a cost to that. Efficiencies and other 
government small business lending programs like the Paycheck 
Protection Program, as I mentioned with Ranking Member Waters. 
I think we would have been able to make sure we achieve fair 
lending all over the country and know exactly what is happening 
to so many small businesses, franchisees, and more.
    Ms. Velazquez. As the ranking member on the House Small 
Business Committee, I am a strong supporter of the 
implementation of Section 1071. Thank you.
    Mr. Barr. The gentlelady yields back.
    The gentleman from Texas, Mr. Sessions, is now recognized.
    Mr. Sessions. Mr. Chairman, thank you very much.
    Director Chopra, welcome to the Financial Services 
Committee.
    The CFPB has been engaged in and is engaged in--as you 
mentioned--a lot of data breaches that occur in the private 
sector and in banks, financial institutions, and the 
government.
    What have you learned from those that you have taught the 
government?
    Mr. Chopra. Yes. One of the things that was very unique to 
the recent insider threat at the Bureau was that we have put in 
a lot of things over the years--penetration testing and other 
things--to make sure systems can't be hacked. We are now at the 
point where I think other----
    Mr. Sessions. The systems can't be hacked?
    Mr. Chopra. That is where the efforts have gone in for 
outsiders. But insider threats, I think, is one where there is 
more attention that all of the agencies, including the CFPB, 
need to guard against--a now former employee emailed themselves 
a set of emails, which was in complete violation of acceptable 
use policies.
    Mr. Sessions. What did you do to that employee?
    Mr. Chopra. I am prohibited from talking in specifics about 
personnel matters, but I can----
    Mr. Sessions. Did you refer the matter for prosecution?
    Mr. Chopra. We have referred the matter to investigators, 
including the Inspector General and others. We are cooperating 
with all of them. They have various authorities that go beyond 
our authority, civil, criminal, and others.
    Mr. Sessions. So, you think that some of the breaches come 
from internal employees?
    Mr. Chopra. In this recent incident that we informed 
Congress about, it was from a CFPB employee. And that is 
something that, especially with more devices, phones, and 
recordings, we need to figure out how----
    Mr. Sessions. What have you taught the government in your 
investigation to help them? Because I recognize that your focus 
is entirely on beating the stuffing out of the free enterprise 
system.
    Mr. Chopra. That is not true, sir.
    Mr. Sessions. There is sufficient evidence to suggest that 
my statement would be true and yours would be also, sir.
    What have you taught the government?
    Mr. Chopra. I think in this incident, we have been working 
with all of the appropriate agencies, the Office of Management 
and Budget (OMB), and others. I think as we have talked to the 
other banking regulators, we recognized that we all need to 
figure out, how do we ask and allow institutions to give us 
data in even more-protected forms, and what can we do to police 
insider threats effectively?
    I think there is so much that government employees across 
the government have access to in terms of sensitive 
information, and ensuring that it does not get disclosed is 
absolutely critical.
    Mr. Sessions. Evidently, Homeland Security and, to a large 
part, the Secret Service have large jurisdictions for 
investigating and prosecuting these incidents. What are your 
regular conversations with them about what you have learned?
    Mr. Chopra. Primarily, in these situations, OMB and other 
guidance says to work with the Inspector General, and of 
course, others, like the Justice Department, and as you know, 
the FBI is under the Justice Department. We try and provide all 
of the evidence to them. They have to conduct their own 
investigation.
    But as a policy matter, I do think we want to contribute 
our learnings on insider threats, which may be an issue across-
the-board that we all have to carefully combat, especially with 
new technologies to which individuals have access.
    Mr. Sessions. You are the Director. I am not. You and I 
could have different ideas about what we believe the focus 
should be. But I would hope that you would put a major focus on 
data security, from the things that you have learned, and be a 
leader in that field. I am not arguing that you are not today. 
But I believe that a major focus of your 1,600 employees could 
be almost single-handedly across that until we defeat those who 
want to steal our intellectual property, our personal data, and 
other things.
    Mr. Chairman, I want to thank you for this time.
    Director Chopra, thank you.
    Mr. Barr. I thank the gentleman.
    The gentleman from California, Mr. Sherman, is now 
recognized.
    Mr. Sherman. I want to strongly endorse one of the 
statements the acting Chair made in his opening statement. Mr. 
Chopra, you are indeed continuing the legacy of Director 
Cordray in your work. Congratulations.
    The CFPB's importance is demonstrated every day. Nothing 
proves it more than the incredible efforts made here in 
Washington to silence and defeat you. You are the most-
effective consumer protection organization I think the world 
has seen in the area of financial services. And it is critical 
that we win this case before the Supreme Court. I say, ``we,'' 
because I joined the ranking member and so many others in the 
amicus brief to make sure you get the same kind of funding that 
the Fed has had for well over 100 years.
    As you point out in your opening statement, you have 
secured $4.6 billion in refunds and penalties against 
violators, and that is just the tip of the iceberg. Because 
every time you collect a fee, you get many, many other 
companies to change their policies or to not engage in policies 
in which they might otherwise engage. And as you point out, you 
deal with 10,000 consumer complaints every week.
    I want to thank you for focusing in your opening statement 
on two issues important to me. First, thank you for your work 
on the London Interbank Offered Rate (LIBOR) transition. Some 
$16 trillion of instruments, including trillions of dollars of 
home mortgages, are going through that transition.
    And second, you mentioned Property Assessed Clean Energy 
(PACE) lending. As to PACE lending, I want to commend you for 
your new regulation as required by law to require Truth in 
Lending Act (TILA)disclosures and ability-to-pay 
determinations. But the battle is not over. The industry will 
fight back, and I hope that you stand strong.
    You, under Section 1071, are requiring disclosures on small 
business lending to women-owned businesses, minority-owned 
businesses, and LGBTQI-owned businesses. And I know you have 
pledged to help lenders, especially small lenders, implement 
that rule. I am told that some lenders have submitted questions 
over a month ago, and they submitted to those designated 
mailboxes and are not getting responses. So, I hope you can go 
back and get them those responses.
    Credit repair scams are not just annoying television 
commercials. They charge you a lot of money. They just 
blanketly contest everything on your credit report. Your score 
then goes up for a little while until they realize that most of 
those entries were accurate, and then it goes back down. What 
are you doing to deal with the scheme where you get your credit 
report improved for a little while?
    Mr. Chopra. Yes. We are looking hard at all the ways in 
which consumer credit report issues can spawn scams. We have 
brought a number of enforcement actions here. We do work with 
the Federal Trade Commission (FTC), and State Attorneys General 
to bring action. But we don't want to play Whac-A-Mole.
    We want to figure out what is the way that consumers 
themselves can know how they can dispute inaccurate 
information. We want to make sure that fraudsters are not 
parking or placing debt on credit reports that is not even 
owed. So, there is a lot to work, and I know many on this 
committee--
    Mr. Sherman. And I will furnish you one idea: When they 
start advertising about what percentage of their customers they 
improve the score for, they should not be claiming temporary 
improvements.
    Mr. Chopra. Yes.
    Mr. Sherman. Under Section 1031, you are dealing with 
privacy. Data aggregators and fintechs are not subject to a lot 
of the Federal supervision that banks are, so what steps are 
you taking to protect Americans from the misuse of their data 
by data aggregators and fintechs?
    Mr. Chopra. We have started, as I mentioned in my 
testimony, to put more emphasis on nonbank supervision, 
especially the firms that sometimes touch millions and millions 
of consumers who have not been subject to similar supervision.
    We want to make sure that the abuse you mentioned is not 
collected for one purpose but monetized for a completely 
different one. It is going to be a challenge, but we are 
starting by making sure we are targeting our supervisory 
resources properly.
    Mr. Sherman. And finally, I hope that you would look at 
these for-profit debt relief agencies that keep you from 
talking to your bank first because often you can revolve it 
with the--
    Mr. Barr. The gentleman's time has expired.
    The gentleman from Missouri, Mr. Luetkemeyer, is now 
recognized.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Mr. Chopra, welcome. Last time you were here, we discussed 
your schedule, about the fact that you don't meet with people 
from the industry. We showed your schedule to you. You made 
some comments about it.
    We sent you a letter and asked you to fill in the blanks 
and tell us that you actually did meet with people in the 
industry. You responded to us with a letter, but in that 
letter, you didn't respond and explain the lack of data in that 
schedule.
    So from that, I can assume two or three things here. Number 
one, the letter was to me, Mr. Huizenga, and Mr. Barr. You 
thumbed your nose at us and said, you are not worthy of a 
response, or else we were correct in that you are not meeting 
with industry people as they tell us, or both, which I think is 
probably the case. It's very disappointing.
    Mr. Chopra. Let me just say that there are many industry 
associations. We have done----
    Mr. Luetkemeyer. Mr. Chopra, we have been down this road 
before. The problem is that you don't meet personally; your 
staff does.
    Mr. Chopra.No, no, no. I meet personally.
    Mr. Luetkemeyer. No, you don't. Your schedule doesn't back 
that up.
    I want to move on.
    Ms. Waters. Please allow the gentleman to answer.
    Mr. Luetkemeyer. Reclaiming my time, I want to move on to 
another subject here.
    Director, you have clearly chosen to regulate by press 
release, guidance, and the threat of enforcement action instead 
of through rulemaking governed by the Administrative Procedure 
Act (APA).
    As you know, the APA allows for public notice and comment 
on proposed rules, which gives regulated entities an 
opportunity to provide feedback and share their concerns or 
incorporate an agency's rules in order to produce workable 
policies.
    Since public statements are not rulemakings or official 
actions, and the guidance you issue is not legally binding, are 
financial institutions and firms within their rights if they do 
not adhere to your proclamations?
    Mr. Chopra. I could not hear you.
    Mr. Luetkemeyer. Okay. Since public statements are not 
rulemakings or official actions, and the guidance you issue is 
not legally binding, are financial institutions and firms 
within their rights if they do not adhere to your 
proclamations?
    Mr. Chopra. Yes. Guidance advisory opinions don't create 
new obligations. One of the pieces of feedback this committee 
has given is concerns about using enforcement only. I have 
continued a practice from my predecessor, Director Kraninger, 
to issue more informal guidance and opinions because it helps 
give transparency about what approach the agency is taking.
    Mr. Luetkemeyer. Okay.
    Mr. Chopra. But it is not intended to create any new----
    Mr. Luetkemeyer. That doesn't answer my question, though. 
My question is, are the firms within their rights to not adhere 
to your proclamations or to this guidance?
    Mr. Chopra. No. They have to follow statute and regulation.
    Mr. Luetkemeyer. That is not my question. They are within 
their rights, then, to not adhere to your proclamations and 
your guidance, is that correct?
    Mr. Chopra. I think I am trying to be responsive. I think 
the answer is, yes, they only have to look to statute and 
regulation as for what is binding.
    Mr. Luetkemeyer. Okay. That is right.
    Mr. Chopra. These other forms--we got input from the 
Consumer Bankers Association a few years ago that they wanted 
to see more guidance and----
    Mr. Luetkemeyer. Okay. It is clarification, then. It is 
clarification that you are using guidance and official actions, 
right?
    Mr. Chopra. I think what we are trying to do is--the market 
is so dynamic, and it changes so much. So, we often have 
entities saying, do I need to hire a lawyer to figure this out?
    Mr. Luetkemeyer. That is fine to discuss. I know what you 
are trying to do, Director. But it is not enforceable. That is 
my point.
    Mr. Chopra. It is trying to restate existing law and 
regulations.
    Mr. Luetkemeyer. It is not enforceable. Is that correct?
    Mr. Chopra. That is right. I am sorry if I----
    Mr. Luetkemeyer. Guidance is not enforceable, correct?
    Mr. Chopra. It does not provide any legal----
    Mr. Luetkemeyer. Okay. Clarification through official 
documents, such as your compliance bulletins, is not 
enforceable, correct?
    Mr. Chopra. That does not provide any obligation, so there 
is nothing to enforce.
    Mr. Chopra. Okay. So, it is not enforceable. That is your 
statement. You agree with that?
    Mr. Chopra. Yes.
    Mr. Luetkemeyer. Wonderful. We finally got here.
    It is very disconcerting because you have compliance 
bulletins here--I think there are 12 compliance bulletins and 
opinions, which is great. It gives clarification to folks. But 
it is not enforceable.
    This is very concerning to me because you turn around and 
you threaten different entities all the time. You have become 
the greatest extortionist in the history of this country by 
what you are doing with these actions when you issue press 
releases, and make up new terms like, ``junk fees.''
    ``Junk fees'' is not a legal term. It is not an enforceable 
term. I have checked with attorneys. I have looked at the 
people who design and work through financial and legal 
dictionaries. This is not an enforceable term. You made it up 
to give yourself more authority to be able to have more impact 
on things and extort more money from people.
    Mr. Chopra. I completely and respectfully disagree with 
that.
    Mr. Luetkemeyer. Well, I am glad----
    Mr. Chopra. Every action we have taken is based on laws 
that this body has enacted, but through legislation----
    Mr. Luetkemeyer. Director, junk fees is not a legal term. 
It is not an enforceable term, period. Just like guidance is 
not enforceable. And yet, you try and impose that on people. 
You extrapolate from the UDAP authority using the term, ``junk 
fees,'' to be able to have new authorities. You can't create 
authorities out of thin air. Only Congress can give you that 
authority, and you are creating it yourself.
    With that, I yield back.
    Mr. Barr. The gentleman yields back.
    The gentleman from New York, Mr. Meeks, is now recognized.
    Mr. Meeks. Thank you, Mr. Chairman, and Ranking Member 
Waters.
    And thank you, Director Chopra, for being here.
    In listening to some of this debate, I can't help but say, 
thank God that we created the CFPB, which is singularly 
focused, because I hear the interest of other groups who have 
people to advocate on their behalf. Most of the industries and 
anyone else has someone to advocate on their behalf.
    What I don't understand is why it is so bad to have an 
agency, which you represent, to advocate on behalf of the 
American consumer. Throughout history, we have seen the 
consumer be ripped off, taken advantage of--so much, that is 
why we have to have labor unions--because we know and we have 
seen that folks on their own don't see a move in the benefit of 
everyday people.
    So, there has to be someone to advocate on their behalf, to 
look at it, to make sure that the playing field is level for 
consumers. Not to harm businesses, but to level the playing 
field so that the consumer has a voice and someone there to 
say, don't rip us off.
    This is a bad product. I lived it in the financial crisis 
of 2008. That is why you are here, because we said we can never 
allow that to happen again.
    And one of the proudest moments of my career here was 
working with Ranking Member Waters and others to create the 
Consumer Financial Protection Bureau. So, I thank you for doing 
your job. And your job is to advocate on behalf of consumers. 
That is your job.], singularly focused on helping the American 
people.
    And you help all of them. Not just Democrats. You are 
helping the American consumer who is a Democrat, who is a 
Republican, who is an independent, no matter where they are, 
rural or urban. Thank you for doing that.
    Now, the recent bank failures of Silicon Valley, Signature, 
and First Republic Banks dominated the media and the media 
attention, and this committee particularly this spring. We had 
an opportunity to speak with the potential regulators 
responsible for the oversight of the institutions and continue 
to look at what could have been done to prevent the failures, 
but we have not yet had the opportunity to speak with you in 
the aftermath, the voice and the advocate for the consumer.
    So from your perspective, how do the recent bank failures 
highlight the need for a strong CFPB, now more than ever?
    Mr. Chopra. As you referenced, in your own community and 
almost everyone's, the financial crisis was absolutely 
devastating. And the victims of financial crises--the first 
ones are often those who can least afford the shock.
    So, we had to take extraordinary steps to mitigate some of 
that damage. But also, people are now learning about deposits 
and safety and insurance. And there are places where people may 
be holding their money that aren't insured. And we are going to 
obviously want to make sure that any instability in financial 
markets does not impact the consumer, as you say.
    The failure of credit sweeps as well in the forced merger 
with UBS was a big concern at the CFPB to figure out, how could 
it affect our mortgage markets, our auto loan markets, and 
others? So, financial stability and consumer protection 
absolutely go hand in hand.
    Mr. Meeks. Thank you. We also heard that the CFPB teamed up 
with the Federal Reserve, the FDIC, the FHFA, the National 
Credit Union Administration, and the OCC to propose a rule 
designed to make the automated home valuation process fair. And 
I believe that it is going in the right direction.
    But I am curious, when we talk about AI, would this rule 
promote automated appraisals over human appraisals?
    Mr. Chopra. No. I think that it is trying to make sure that 
AI and algorithms, when used to automatically compute homes, do 
not bake in any sort of discrimination. I think everyone 
deserves a fair and accurate appraisal, and that is what the 
proposal which implements Federal law seeks to provide.
    Mr. Meeks. Thank you.
    Mr. Barr. The gentleman's time has expired.
    The gentleman from Michigan, Mr. Huizenga, is now 
recognized.
    Mr. Huizenga. Thank you, Mr. Chairman.
    And, Director Chopra, welcome back.
    I have a number of things to get to here, but I was 
curious, when my colleague, French Hill, was asking you about 
the breach, it seemed like you were downplaying it. You said, 
``insider threat,'' that that person, ``sent some emails.'' 
Later, to another question, you indicated it was a, ``set of 
emails.''
    Would you classify the incident that happened as a minor 
incident, a sort of medium-sized incident, or was it a major 
incident?
    Mr. Chopra. It was an extremely serious and major incident. 
There is no question about that.
    Mr. Huizenga. Okay. Great. I'm glad to hear you backing 
that up.
    Mr. Chopra. And I apologize. I don't want to underplay it 
in any way. We have looked hard to make sure we are following 
all of the steps. We have begun notification of----
    Mr. Huizenga. Yes.
    Mr. Chopra. Sorry.
    Mr. Huizenga. I understand that. And I was back conferring 
with our attorneys as to exactly how much we could talk about 
publicly because we don't want to get in the way of an 
investigation. I know you don't, and I don't, either. But I do 
have some concerns.
    You were notified in March to let the committee know in May 
about what you now call a major incident, and we asked for a 
briefing on that. A briefing was granted at the staff level, 
however, when our attorneys asked your briefers--I don't know 
who they were. Maybe they were attorneys; maybe they weren't. 
But when they were asked basic questions like, ``Did anyone at 
CFPB speak to the individual?'', staff from your agency could 
not answer the question and advised committee staff to speak to 
the Inspector General.
    Your staff explained the only reason why CFPB knew about 
the breach was from a different employee. You have talked about 
that. Committee staff asked about the identity of the other 
employee and about the circumstances surrounding the employee 
raising concerns. Your staff could not or would not give a 
single answer to any of these basic questions.
    CFPB staff emphasized that there was no reason to suspect 
the information was disseminated--which I think we were all 
glad to hear--because it is my understanding, from what I have 
been briefed on, which I don't believe is public information as 
of yet, that this was a major incident with significant 
consequences, potentially. However, when they were pressed, 
they confirmed that the only evidence to sustain the claim was 
that, so far, there had been no suspicious activity.
    For a little perspective--I won't go into all that, but we 
all have seen what has happened with Equifax and others that 
have had serious data breaches, and you have been a part of 
punishing others that have had serious data breaches.
    And I am glad to hear you say it is serious, and I am glad 
to hear that you are cooperating with law enforcement, but we 
also expect you to fully cooperate with this committee, and 
Congress writ large, and with our Oversight and Investigations 
Subcommittee, which is called that for a reason.
    These are basic questions that we are asking, and we expect 
full and complete answers, and your staff couldn't give basic 
answers, and sometimes, there wasn't any answer at all.
    I am sorry to be suspicious here, but I know how D.C. 
works, and with your sort of dismissive attitude towards 
Congress that has come across in previous hearings and previous 
interactions, it makes me wonder if you intentionally sent 
someone who didn't know what was going on so that they wouldn't 
pass that information on to us? Were they somehow opaque in 
their answers for some reason?
    I am not expecting you to answer that because I am not 
looking specifically for a response. But I am making sure, once 
again, you are put on notice that we will be following up, and 
we expect our questions to be answered.
    One last thing I am going to pivot to is the Bureau's 
website provides fund transfer request letters that you have 
made to the Fed before every quarter of the financial year and 
the Fed's response.
    To your knowledge, has the Fed ever denied your agency's 
funding request?
    Mr. Chopra. Not to my knowledge.
    Mr. Huizenga. Okay. Has the Fed ever provided feedback on a 
quarterly budget request, meaning, has the Fed ever told you 
that a request was too high or too low?
    Mr. Chopra. I believe the Fed's feedback is usually about 
when we should request it because they manage it for liquidity 
purposes.
    Mr. Huizenga. Okay. The last time that the shared Fed and 
CFPB Office of Inspector General (OIG) did an audit of the 
Bureau's budget and funding process in July of 2020, it was 
done at the request of Chairman McHenry, and that was almost 3 
years ago. Are you aware of any other oversight conducted about 
the CFPB's budget?
    Mr. Chopra. Yes. We do have an audit by----
    Mr. Huizenga. Sorry, my time is up.
    I do have a letter to be submitted for the record, Mr. 
Chairman, a letter that I sent along with your signature, and 
we wanted to make sure that that was--regarding the concerns--
--
    Mr. Barr. Without objection, it is so ordered. The time has 
expired.
    Mr. Huizenga. I yield back. Thank you.
    Mr. Barr. The gentleman from Georgia, Mr. Scott, is now 
recognized.
    Mr. Scott. Thank you.
    Director Chopra, there are a lot of problems with this 
crypto asset fraud business. In November of last year, you all 
published a complaint bulletin that dealt with these 
complaints, fraud, theft acts, scams. All of them were 
significant problems.
    And your analysis suggests that the bad actors are 
leveraging crypto assets to specifically perpetuate fraud on 
American consumers. And from October 2018 to September 2022, 
you all received 8,300 complaints.
    Director Chopra, has the CFPB determined whether certain 
vulnerable groups are at particular risk for these scams?
    Mr. Chopra. Yes. I believe we specifically mentioned older 
adults. It used to be more common, for example, for a scammer 
to ask someone, go buy me some gift cards, but we are now 
seeing it shift to more digital, often using crypto assets.
    We have also identified a place where it has some 
interaction with identify theft, where it is not always crypto-
specific, but servicemembers can be targeted for ID theft in 
ways that can really expose them to certain harm----
    Mr. Scott. Let me ask you this, because we have to find 
some answers to this. The problems are overwhelming. You all 
have some great people over there at the CFPB. And we 
established this for a purpose, and we have to find some 
answers here.
    Let me ask you, will financial literacy, financial 
education help? This is being put on people who are having 
difficulty.
    Mr. Chopra. Yes. I think it is actually really important 
that we shift financial education and literacy so that it is 
really adapted to the digital world. There are lots of 
different ways in which digital technologies--and with 
generative AI, we could have voice cloning in ways where it can 
sound like a family member is calling you. We could have 
different ways in which digital images can look like reality, 
and we want to make sure we can arm people on how they can spot 
some of this.
    Mr. Scott. That is very good. With what you said in mind, 
Director Chopra, and because we are concerned about this, can 
the committee get a clear commitment from you today that the 
CFPB will use a portion of the more than $600 million in 
unallocated civil penalty funds to support financial literacy, 
financial education, for our consumers, in a program?
    We have to arm our people with the weapons. They are the 
ones who are being targeted. We have to put some arms on them, 
soldier them with the full armor of protection. Use this money. 
That is what it is there for. Will you commit to doing that 
today?
    Mr. Chopra. We will commit to using funds for financial 
education purposes. We may use other statutory funds to do 
that. The fund you referenced is also to be used for victims' 
relief for people who are victims of scams, and we want to make 
sure that they can receive payouts.
    We do have other funds, and we can share with you what some 
of our spending will be on financial education, but we may want 
to use our general funds, not the victims'.
    Mr. Scott. But the priority ought to be to stop them from 
becoming victims.
    Mr. Chopra. I totally agree. But there are so many people 
whose lives are changed when they are able to get----
    Mr. Scott. Can we get this commitment from you? I am not 
asking you how much to use, I am saying, will you use this 
money and----
    Mr. Chopra. We will certainly use funds that we have access 
to for financial education, but I would like to discuss further 
with you the tradeoffs about using the fund.
    Mr. Barr. The gentleman's time has expired.
    The gentlewoman from Missouri, Mrs. Wagner, is now 
recognized.
    Mrs. Wagner. Thank you, Mr. Chairman, and welcome, Director 
Chopra. I would like to follow up on a line of questioning that 
my colleague, Mr. Luetkemeyer, began, discussing the CFPB's 
industry outreach and specifically your public calendar.
    On February 7, 2023, my colleagues, Mr. Luetkemeyer, Mr. 
Barr, and Mr. Huizenga, sent you a letter, requesting specific 
information regarding your calendar and industry outreach.
    In your response to their letter, dated February 21, 2023, 
you stated, ``like my predecessors, I have continued the 
agency's commitment to transparency through our long-standing 
policy of publicly posting the calendars of senior leaders.''
    Director Chopra, it appears that your commitment to 
following this long-standing policy has been completely absent 
this year.
    The CFPB's website states that each month's calendar will 
appear at least a few weeks after each month has concluded, but 
it has been almost 6 months--22 weeks--since your calendar has 
been publicly disclosed. There is nothing here.
    Can you please tell me why your calendar has not been 
publicly disclosed for half the year?
    Mr. Chopra. I am not actually aware that that is the case, 
but if it is the case, we will look to make sure that it 
happens in a faster way.
    Mrs. Wagner. It is, it is absolutely the case, and I am 
just reading to you directly from a letter to Congress in 
response, dated February 21st. So, there are the quotes. It is 
concerning.
    Mr. Chopra. I will just share, though, that with respect to 
industry outreach, we have----
    Mrs. Wagner. I am not asking about that.
    Mr. Chopra. Okay, sorry.
    Mrs. Wagner. I reclaim my time.
    Mr. Chopra. I apologize.
    Mrs. Wagner. Would you say a 6-month hiatus of public 
disclosure is your way of showing commitment to transparency, 
sir?
    Mr. Chopra. We would want to do that in a fashion that is 
responsive, and I will take a look directly----
    Mrs. Wagner. Yes, your own website states, ``due to the 
time-intensive preparation process, each month's calendar will 
appear on this page at least a few weeks after that month has 
concluded,'' and that is just clearly not true.
    Moving on, the comment period to the CFPB's proposal to 
adjust the safe harbor dollar amount for credit card late fees 
was just 36 days. You received more than 55,000 comments, many 
of which were submitted weeks prior to the deadline, which was 
May 3rd, the majority of which came from real consumers and 
retail investors. But they weren't posted in the comment file 
until a full month after the deadline closed.
    What was the reason for the delay in posting these 
comments, sir? Was the Bureau overwhelmed by volume, or did you 
intentionally delay the posting of these comments?
    Mr. Chopra. No, definitely not. When we receive large 
amounts of comments, one of the things that we do have to do, 
manually often, is to make sure it does not include account 
information. Sometimes, people might be trying to file a 
complaint. We do not want it to be a vector of identify theft.
    And I will also just share, 36 days from the time we 
published the proposal, there were more than 36 days, and I 
would be happy to get you those details.
    Mrs. Wagner. I will tell you this then, you should have had 
more than ample time to begin with, to post some of those over 
55,000 comments out there, in real-time, sir, because you don't 
wait until after to delay it further. I consider that 
intentional, and frankly, Director Chopra, I am just seeing----
    Mr. Chopra. No, absolutely not. We are trying to do our 
best----
    Mrs. Wagner. Reclaiming my time, sir, I am seeing an 
extremely troublesome theme here, and that is what I am trying 
to get to.
    You claim to be for transparency--I am for transparency--
but the blatant lack of timely public disclosure says 
otherwise. I don't care whether it is your calendar or you 
publishing comments. So, I would like you to take a serious 
look at that.
    Mr. Chopra. I will make sure--I do believe we are in line 
or better than most of our peer agencies, but I will get back 
to you, Congresswoman.
    Mrs. Wagner. Okay. I am concerned about what is your 
responsibility. The CFPB's credit card late fee proposal 
ignores the important role that late fees play in deterring 
consumers from paying their bills. If late fees are capped at 
such a low amount and the deterrent effect is nonexistent, more 
consumers will pay their bill late, leading to a higher share 
of delinquent accounts, which will be reported to credit 
bureaus and result in lower credit scores.
    Director Chopra, I am not going to have enough time for you 
to answer, but I would like an answer in writing. Why is the 
Bureau proceeding with a rulemaking that has no consumer 
benefit and would actually result in tremendous harm to 
consumers?
    Mr. Barr. The Director can answer for the record, and it is 
a good question.
    Mrs. Wagner. Thank you, and I yield back.
    Mr. Barr. I now recognize the gentleman from Massachusetts, 
Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    Welcome, Director Chopra. It's good to see you again. And I 
do want to push back on the suggestion that you are not 
amenable to meeting with industry representatives and business 
concerns, as well as consumer groups. I think you have been 
exceedingly accommodating on each and every instance, at least 
to my knowledge.
    I do want to put one quick issue before you. The Peterson 
Institute for International Economics defines junk fees as, 
``surprise charges that customers do not discover until they 
nearly complete a transaction, such as booking an airline 
flight, renting a car, checking out of a resort, or paying by 
credit card.''
    Is that basically your understanding of what a junk fee 
would be?
    Mr. Chopra. I think it is a colloquial term, and I also 
hear a lot about what are the fees that are not subject to real 
competition and competitive pricing.
    Mr. Lynch. Right.
    Mr. Chopra. Really, ones that may not be subject to the 
normal forces of shopping.
    Mr. Lynch. Right. And as more and more retail happens 
online, is the incidence of those junk fees growing or 
becoming----
    Mr. Chopra. Each industry is different. I think we see, 
based on the empirical research, about where can firms be able 
to use, sometimes drip pricing where they can advertise one, 
but really the full costs are lifetime costs, and come later in 
the process when the consumer has less ability to negotiate.
    Mr. Lynch. Right. And I know President Biden identified 
that in his State of the Union Address, and he called upon 
Congress to eliminate those hidden junk fees from consumers' 
transactions.
    I want to talk about something else. There has been a real 
shift among financial services firms to use chatbots, and I 
know you have done some work on this. I know you issued a 
memorandum, just an executive summary, on chatbots and consumer 
finance.
    What are we seeing out there? I guess it is anecdotal, but 
my constituents are complaining about the fact that when they 
have a problem with the bank, they are getting hooked into 
these chatbots, and sometimes their problems are not resolved, 
which leads them to call me.
    And I am just wondering, are we meeting our obligations to 
consumers when we allow banks to put a chatbot in an interface 
between them and the consumer that doesn't adequately resolve 
their problems?
    Mr. Chopra. I think this is one use of generative 
artificial intelligence we are going to start seeing more and 
more. And one of the things we identified is, when a consumer 
has a very straightforward question--where is the closest 
branch, something that has a defined answer like in a FAQ--they 
may be able to get it.
    There are places where consumers have to provide a lot of 
account information, personal information, and it is important 
that that information, if it is used to train AI, how is it 
being protected? When the consumer has to invoke a right to 
dispute under the Fair Credit Billing Act, can the chatbot 
actually handle it?
    So, we are just reminding institutions that if they are 
moving everyone to this, they still have to adhere to these 
important legal protections and make sure that they are not 
violating privacy and more. And it can really undermine 
relationship banking if not tailored appropriately.
    Mr. Lynch. Right. I understand that the more basic 
questions could be dealt with by a chatbot, and I am sure that 
there are personnel savings there and efficiency issues that 
are certainly favorable. But as you mentioned, when matters 
become more complex, it doesn't seem at this point that the AI 
chatbots are capable of resolving those complex issues.
    Is there any thought of providing an opt-out for when the 
issue becomes so complicated that the consumer would have an 
ability to go to a default which would provide a human being on 
the other side of that?
    Mr. Chopra. Yes. I think that is a place where financial 
institutions need to be careful about denying access to a human 
in some form because it can lead to real frustration and a doom 
loop.
    Mr. Lynch. Okay.
    Thank you, Mr. Chairman. I yield back.
    Mr. Barr. The gentleman yields back.
    The gentleman from Texas, Mr. Williams, is recognized.
    Mr. Williams of Texas. Thank you, Mr. Chairman. And thank 
you, Director Chopra, for being here.
    I was just sitting here thinking that the consumer needs to 
be protected from the Federal Government, from all the things 
we are talking about.
    And another thing, as we have been talking about these bank 
failures, I am from Texas, as you know, and I don't like well-
run Texas banks--I want to go on record with this--bailing out 
badly-run California banks. I think that is really bad policy.
    Director Chopra, the first time you came here before this 
committee, you said you would protect the interests of small 
businesses. I proudly serve as the Chair of the House Small 
Business Committee, and I can tell you that we don't feel too 
protected. And ever since you joined the CFPB, your agency 
continues to add burdensome requirements without any 
consideration of their impact on small businesses and small 
lenders.
    When talking to community bankers back in my district in 
Texas and, quite frankly, all over and across the country, 
every single person tells me how miserable and terrified they 
are about the CFPB's Section 1071 small business data 
collection rulemaking. They are concerned that the complicated 
reporting requirements will tie up loan officers and increase 
compliance costs, plus compliance officers, costs which will be 
passed down to the consumer, guys like me who borrow every day. 
We will pay for all this.
    And they are concerned this will push the industry towards 
a standardized small business loan product and kill 
relationship banking, what free enterprise and capitalism are 
based on.
    And everybody is concerned, too, that it is going to push 
the industry toward a standard-size small business loan and 
kill relationship banking, as I said, and they are concerned 
that this will force their employees to treat privacy as an 
afterthought and collect more data than necessary on small 
business loan applications, which is what we don't want to have 
happen. Right now, small businesses are struggling with rising 
costs due to inflation, increased interest costs, and ongoing 
labor shortages, and this out-of-touch rule will only build on 
these issues.
    This is a hard time for small business. And the Section 
1071 rule is an attack on Main Street America--that is the only 
way you can look at it--which is why I introduced the 
Congressional Review Act, with Congressmen Barr and Ogles, to 
halt the implementation of the CFPB's final 1071 rule.
    Senator Kennedy is leading the Senate companion of this 
resolution and has the support of over 45 State and national 
associations, further proving the urgent need to block this 
regulatory overreach and make sure it does not take effect.
    It is bad business, it is bad for Main Street, it is bad 
for consumers.
    Now, Director Chopra, how have you been working with small 
businesses? How have you been helping them to ensure that your 
regulations are not causing any undue burdens on our country's 
small business owners? How have you been doing that? Because 
there is real concern that they don't hear from you.
    Mr. Chopra. One of the things we have done is, we have 
focused a lot of our engagement on institutions that we don't 
supervise. I have met with, I believe, 28 State bankers 
associations, each of which have dozens of members. We have 
done the same thing with credit union leagues. I believe we 
have hit 20 States and the District of Columbia. I just want to 
say I take your points very, very seriously, and we tried to 
adjust the rule in ways that would reduce some of those costs.
    Mr. Williams of Texas. Reclaiming my time, you don't think 
it creates a burden for these financial institutions? Do you 
think it eases it?
    Mr. Chopra. Oh, we certainly publish what we believe will 
be some of the costs. We tried our best to figure out what are 
the ways in which we can limit it, and we also created and made 
significant changes so that the smallest banks, 2,000 of them, 
will not have to do it. I hear you completely. We don't want 
standardized small business lending----
    Mr. Williams of Texas. And it does trickle down to the 
consumer like me, the borrower.
    Let me ask you this. The CFPB's funding mechanism that we 
talked about leads to very little congressional oversight of 
the budget, and instead your budget is given to you by the Fed. 
There are many more court challenges out there regarding your 
funding mechanism, and the actions of the Bureau do not comply 
with regular order, therefore, creating more uncertainty in 
markets as everyone waits for the courts to decide.
    In order to ensure your accountability and transparency to 
Congress, it is imperative that your operation be subject to 
congressional appropriations. So, Director, if the Supreme 
Court strikes down your funding mechanism, will you be 
accepting of being subject to congressional appropriations?
    Mr. Chopra. We will comply with any Supreme Court decision 
and make sure that we are following the law and doing so 
accordingly.
    We don't agree. The Solicitor General has filed a petition 
seeking reversal. There are conflicting opinions in the circuit 
courts, and we will look forward to the results in that matter.
    Mr. Williams of Texas. Lastly, the CFPB fined Equifax for a 
data breach. Did you fine yourselves?
    Mr. Chopra. I was not part of that. I am happy to tell you 
in more detail----
    Mr. Williams of Texas. But have you fined yourselves for 
what you----
    Mr. Chopra. This is an insider threat. It is a different 
situation, but it is a very serious one.
    Mr. Williams of Texas. My time is up. I yield back.
    Mr. Barr. The gentleman's time has expired.
    The gentleman from Illinois, Dr. Foster, is now recognized.
    Mr. Foster. Thank you. And I would like to thank my 
colleague for his admiration of the Texas banking system. 
Although we, in Illinois, have not forgotten the tens of 
billions of dollars that we spent bailing out corrupt and 
mismanaged banks in Texas and California during the savings-
and-loan crisis.
    Director Chopra, some have argued that innovations in the 
financial services space, such as open banking, have the 
potential to facilitate consumer choice and increase access to 
credit for many underserved Americans in ways that our broken 
credit reporting system cannot. For example, open banking could 
provide access to a much wider range of consumer data than the 
credit bureaus currently access, which could give a more 
accurate picture of an individual's financial history, but it 
also provides the possibility for all kinds of bias to creep 
in.
    The last time you appeared before our committee, you shared 
an update on the CFPB's small business review panel to advance 
proposals under Section 1033 of the Dodd-Frank Act. Could you 
give an update on that rulemaking?
    Mr. Chopra. Yes. We will be proposing it. It is scheduled 
for October. We have released more on this, including the 
important role that industry standard-setting will play. We 
want to make sure that standards are giving the ability to 
switch, to consumers and all market participants. And I will 
tell you, it is not just more access to credit, lower interest 
rates for borrowers, and higher interest rates for savers. I 
think it is also going to have an impact on customer service 
quality. When a consumer has the power to vote with their feet, 
you will see how our system will give them better service as 
well.
    Mr. Foster. Thank you, and thank you also for going on the 
alert early over the threat of generative AI being used for 
identity fraud. This is coming at us like a tsunami.
    People who have looked at this identify two possible 
government interventions that could help consumers. One of them 
is to simply provision citizens who wish to have one, with the 
means of proving they are who they say they are online, with a 
secure digital identity, sometimes referred to as a Mobile ID 
or a digital driver's license. These are things that allow you 
to present you and your cell phone and your Real ID-compliant 
driver's license to present digital proof in an online or an 
offline environment that you, in fact, are who you say you are. 
And that is one avenue that we can, I think, make a difference 
on.
    The other one are these so-called, ``Blade Runner'' laws. 
There is simply a requirement that any electronic communication 
coming from a machine must start by identifying itself as being 
machine-generated.
    Do you have any comments on either of those two and their 
effectiveness?
    Mr. Chopra. I completely agree that if we can solve this 
identity verification issue, as a core part of infrastructure 
in our country, we could actually reduce a lot of fraud as 
well. The benefits would also be big for market participants.
    How we actually do it, obviously, is the question, but you 
see jurisdictions that have solved that identity verification 
layer get a lot of benefits of it.
    In terms of stating who it is, it is very interesting. You 
are seeing a lot of generative AI, including chatbots and 
others, give themselves human names. This is, in some ways, to 
make it appear that they are an actual person. And with voice 
cloning, it really can simulate a human interaction.
    I do agree that there may be places where, across the 
economy, some of this generative AI, there is a lot more we 
need to do, but people should at least know, are they talking 
to a human or not.
    Mr. Foster. Certainly. And you are going to see things 
where the regional accent or the ethnic accent is matched to 
what the consumer will trust. And this is a huge problem.
    First off, I want to thank you for the work that you did on 
the early versions of AI, trying to to deal with the fairness 
versus accuracy problem. You did some really high-quality work 
on that.
    But the problem we are now facing with generative AI and 
chatbots that learn as they evolve is much more complicated. It 
is sort of analogous to, you raise your child perfectly, but 
then they get exposed to new things as they grow up that will 
make them do evil things that you never would have suspected.
    So, how do you anticipate you are going to be looking at AI 
that evolves and learns?
    Mr. Chopra. Yes. For machine learning and other ways in 
which AI evolves, one of the things we are trying to do at a 
base level is to be able to give information about how existing 
law applies. For example, AI needs to be able to determine, if 
you get an adverse credit decision, what the reasons are. If it 
is constantly changing and it can't do that, it is not able to 
comply with existing law, there is not a generative AI 
exemption in our consumer protection laws.
    Mr. Foster. Thank you.
    Mr. Barr. The gentleman's time has expired.
    The gentleman from Georgia, Mr. Loudermilk, is recognized.
    Mr. Loudermilk. Thank you, Mr. Chairman. Director Chopra, 
thank you for being here.
    Chairman Barr mentioned something in his opening statement 
that I would like to start out with, which is that according to 
your own data, 74 percent of Americans pay their credit cards 
on time. That is to say, they never pay the late fees.
    According to your own proposed rule, however, cardholders 
who do not pay late fees will be paying higher fees and higher 
interest on interest-paying accounts, and will receive lower 
rewards because of the cross-subsidy.
    Under Section 1022 of Dodd-Frank, you are required to 
consider the cost of all CFPB rulemakings. I can't see how this 
rule that rewards irresponsible cardholders at the expense of 
responsible ones is a net benefit.
    With that said, how did this rule survive a rigorous cost-
benefit analysis?
    Mr. Chopra. I appreciate the question, Congressman. What 
you mentioned, those were not predictive. That was potential 
scenarios we looked at. And the core of what we are doing----
    Mr. Loudermilk. What was not predictive?
    Mr. Chopra. The idea that there are potential ways in which 
the market could shift. What I am trying to explain is the core 
of what that real review is doing, that is reviewing a 
congressional prohibition on unreasonable penalty fees. What we 
are trying to accomplish is making sure, yes, if institutions 
have costs, how can they make sure that it is a reasonable 
cost? And we are specifically looking at the Fed's rule they 
put into place, that we inherited, which did not have much data 
backing it, in order to make sure it fits the modern realities.
    No, there are still going to be late fees. It will just--
how they make sure that they are in line with the congressional 
prohibition. That is our----
    Mr. Loudermilk. Reclaiming my time, you said that the fees 
are reasonable. That is very subjective. Now, these are fees 
that the user agreed to when they took the credit card because 
the fees, as you mentioned, do recoup costs, but they are also 
designed to be slightly punitive to stop bad behavior from 
happening again.
    What you are proposing is basically taking that away and 
then giving the punitive charge to those who are obeying the 
contract or the agreement they made with the credit card 
company.
    Mr. Chopra. No, that is not right, and I just want to make 
sure something is clear. ``Reasonable,'' is not the CFPB's 
word. That is actually what is in the statute. The statute says 
that the penalties must be reasonable and proportional to the--
--
    Mr. Loudermilk. But did they not agree to whatever fee 
structure it was when they agreed to take the credit card?
    Mr. Chopra. That is true, but the reasonable and 
proportional is a separate prohibition. So, again, one of the 
things that is in there is, institutions can certainly be able 
to show why there is reasonable--and we have proposed a 
framework----
    Mr. Loudermilk. But why are you even going this direction?
    Mr. Chopra. The reason is what we have found across 
consumer credit markets is that it is not a fair and 
competitive market when an institution has an incentive for 
someone to default or be late. We learned the hard way about 
this with subprime mortgages, where an originator actually 
could benefit even if the borrower defaulted.
    Most credit card companies, especially small ones, don't 
have that business model, and our review is that they don't 
actually build a business model or profit more when someone is 
late.
    In some cases, a borrower might just be a day late or a few 
dollars off and get a very large fee. That is what Congress was 
seeking to prohibit, and we want a market where a creditor 
really wants the person to pay back.
    Mr. Loudermilk. Really what I see is, we are intruding in 
what should be the responsibility of the consumer, because they 
agreed to go into this agreement.
    Earlier this year, FHFA finalized changes to the loan level 
price adjustment tables that resulted in borrowers with good 
credit scores paying higher rates for their home. This is 
obviously unpopular with consumers.
    Aren't you concerned that you are sending the same message 
to consumers with this rule?
    Mr. Chopra. No.
    Mr. Loudermilk. Because 75 percent pay theirs on time.
    Mr. Chopra. In fact, I think what this will do is actually 
help consumers compete on up-front pricing. Consumers are 
really smart in the credit card market. As soon as an issuer 
starts raising annual fees, they look to switch. It is easier 
for them to know the full price that way.
    So, what we are hoping to do is adhere to the congressional 
prohibition on unreasonable fees, which is--the word, 
``reasonable,'' is in the statute--while creating that ability 
for more competition up front.
    Mr. Loudermilk. Thank you. My time is expiring, but I would 
think that consumer education would be more effective.
    Mr. Chairman, I yield back.
    Mr. Barr. The time of the gentleman has expired.
    The gentlewoman from Ohio, Mrs. Beatty, is recognized.
    Mrs. Beatty. Thank you.
    Director, thank you for being here, and I would like start 
by thanking you for your work, your integrity, and your 
leadership at the CFPB to protect consumers.
    We have heard about the billions of dollars in consumer 
relief to the hundreds of thousands of Americans, and those 
Americans, would you say, are in all districts, Democrat and 
Republican districts?
    Mr. Chopra. All across the country.
    Mrs. Beatty. Thank you. And that means that it ensures 
fairness, transparency, and competition in our financial 
system.
    Let me say for the record, Mr. Chairman, there is no doubt 
in my mind that consumer protection problems are rampant in our 
financial system, and I want to go on the record saying, 
Americans would be much worse off if the CFPB was no longer 
able to continue its work.
    I have two questions I would like to get through, but 
first, since there has been a lot of attention to your schedule 
and your time, it seems like we alternate terms or Congresses 
when we decide to pick on the individual or the CFPB.
    Mind you, since I have been here and many of my colleagues 
on this committee, I remember when former member of this 
committee, Congressman Mulvaney, said some of the most 
disparaging things about the CFPB and about the Director at 
that time, Mr. Cordray, whom he was replacing. Operative words. 
He went here, yet he took a job to be in the same position you 
are in.
    If we want to talk about integrity, if we want to talk 
about putting politics over people or maybe even money, but to 
his calendar in the committee, he said he worked 3 days a week. 
Now, people are questioning you on a calendar. Do you work more 
than 3 days a week?
    Mr. Chopra. Yes.
    Mrs. Beatty. And he said when he wasn't working, he loved 
watching baseball, and he put a TV in one of his offices so he 
could watch baseball and protect our people.
    So if we want to talk about you being an, ``extortionist,'' 
as somebody said, I want to use the word, ``hypocrisy,'' and 
enter it into the record for everyone on the other side of the 
aisle who chose to support beating you up over a calendar when 
you work more than 3 days a week.
    Now, let me get to my questions. We sent you a letter that 
I signed onto about the Section 1033 rule of including EBT and 
other government benefit accounts in that rule. First of all, 
let me say thank you for responding to the letter, and 
acknowledging that it was an issue and that you would continue 
to look into it. I don't know if you have anything you would 
like to add for the committee about these types of benefits 
being considered within the scope of the final rule?
    Mr. Chopra. One of the things we are going to do is, a 
bunch of these rules for mortgage products and others were 
raised before. With EBT and other government benefits, part of 
what we are doing is, we want to talk to the Department of 
Agriculture and others that administer these, because we really 
want to understand any technical issues. But I completely share 
your view that for all transaction accounts, we want that data 
to be able to be used to help----
    Mrs. Beatty. Thank you. Let me move to my next question. 
Since our Chairman McHenry said we were going to put diversity 
in every committee--I am the ranking member on a subcommittee--
we haven't had a diversity hearing yet. But I would like to 
commend you for 53 percent of the CFPB executives being women, 
and 40 percent identifying themselves as minorities.
    Would you be willing to work with us or respond in writing 
where you are with contracting out to diverse groups, whether 
that is in legal services, contracting, et cetera? And that is 
a yes or a no for my time.
    Mr. Chopra. Yes.
    Mrs. Beatty. Okay. Thank you.
    And in fairness, since I am giving equal opportunities, the 
Director prior to you, Republican-appointed, did hold meetings 
with Democrats and Republicans, and did talk about diversity.
    So, I wanted to thank her for the work that she did do, and 
I also think she worked more than 3 days a week. I don't know 
what her calendar was, but I want to commend you for the work 
that you are doing.
    And also, one of my colleagues said that not much has 
changed. For the record, let me say, you could not receive 
10,000 complaints weekly that you respond to. You could not do 
what you have done with AI. You could not do what you have done 
with algorithms. You could not do what you have done with bank 
failures. So, again, thank you, and my time is up.
    Mr. Barr. The gentlelady yields back.
    The gentleman from Tennessee, Mr. Rose, is recognized.
    Mr. Rose. I want to thank Chairman McHenry and Ranking 
Member Waters for holding this hearing, and Director Chopra, 
thank you for being with us today.
    I want to begin by responding to Mrs. Beatty by saying I 
actually preferred the way that Director Mulvaney ran the 
agency.
    Director Chopra, in CFPB v. Brown, the 11th Circuit Court 
of Appeals found the CFPB's assertion of work product 
objections to avoid identifying witnesses or facts supporting 
claims against the defendants to be egregious. The court held 
that the CFPB clearly violated Federal Rule of Civil Procedure 
30(b)(6), and severe sanctions were warranted.
    Director Chopra, do you believe that the Federal Rules of 
Civil Procedure apply to the CFPB and its attorneys?
    Mr. Chopra. Absolutely, and----
    Mr. Rose. Thank you, yes, of course, they do. So, Director 
Chopra, would you commit to reminding your staff and counsel 
that they are not exempt from the Federal Rules of Civil 
Procedure and that they must abide by them like the rest of us?
    Mr. Chopra. Yes.
    Mr. Rose. Thank you.
    Mr. Chopra. And can I just address that really quickly?
    Mr. Rose. I will give you just a second.
    Mr. Chopra. Litigation often can be very, very heated. That 
was brought many years ago. There was this decision, of course, 
in an overwhelming number of matters, and we have completely 
been respected by the courts for our----
    Mr. Rose. Thank you. I appreciate that commitment to make 
sure your staff understands that the basic Rules of Civil 
Procedure do apply to the agency
    Following passage of the Dodd-Frank Act, then-Special 
Advisor to the Secretary of the Treasury for the CFPB, 
Elizabeth Warren, testified that the Bureau would be 
accountable to Congress.
    I have her testimony right here in front of me, and first, 
then-Special Adviser Warren said that the CFPB is subject to 
the requirements and limitations of the Administrative 
Procedure Act (APA).
    But, Director Chopra, isn't it true that you have routinely 
acted unilaterally and arbitrarily without engaging rulemakings 
in compliance with the APA like you did with the update to the 
UDAP section of the examination manual or by using the 
Paperwork Reduction Act to seek approval for a junk fee timing 
study, just to name a couple?
    Second, then-Special Adviser Warren stated that the CFPB, 
``is the only banking regulator that is required to conduct 
small business impact panels to gather input from small 
businesses about the potential impact of proposed rules.''
    Director Chopra, isn't it true that you have routinely 
bypassed the Small Business Regulatory Enforcement Fairness Act 
(SBREFA) process like you did in your Notice of Proposed 
Rulemakings for non-bank registries for repeat offenders and 
terms and conditions of form contracts?
    Mr. Chopra. No. We completely comply with all of it, and, 
in fact, we published the analysis. We have solicited comments 
on the analysis.
    You also mentioned the Administrative Procedure Act. All of 
our work is reviewable under that law. To suggest--and I have 
heard this suggestion now a number of times--that we don't 
comply with that is absolutely false. What we seek to actually 
do is provide more information, based on feedback from this 
committee, about how to make sure entities know what is 
expected of them----
    Mr. Rose. Specifically, though, I would actively discourage 
you from using the Paperwork Reduction Act when the APA would 
be, I think, a more fair and responsible way for proposing new 
rulemakings, and would criticize the Bureau for not doing that.
    Mr. Chopra. The Paperwork Reduction----
    Mr. Rose. Third, then-Special Adviser Elizabeth Warren said 
that the, ``checks on the CFPB's rulemaking are more stringent 
than the checks on other banking regulators because FSOC can 
veto any rule issued by the CFPB.''
    Director Chopra, has the FSOC ever overruled a CFPB 
rulemaking, and don't you serve on the FSOC?
    Mr. Chopra. I believe the FSOC did begin a review many 
years ago of one, but that rule was set aside for other 
reasons. We have not had a voluminous number of them, but FSOC 
absolutely has the power to do so.
    Mr. Rose. They may have the power, but the truth is, the 
threshold that has to be met is effectively impossible to meet.
    Mr. Chopra. It is unique among banking agencies, though. 
There is no other agency that is subject to FSOC----
    Mr. Rose. But those other agencies have other checks and 
balances.
    Finally and fourth, then-Special Adviser Warren said the 
CFPB's funding structure is a significant source of 
accountability because it faces certain constraints by having 
to request funding from the Federal Reserve.
    Has the Fed ever denied or scrutinized the CFPB's 
Director's budgetary requests? I will let you respond in 
writing for the record. My time has expired, and I yield back.
    Mr. Barr. The gentleman's time has expired, and the 
Director can answer for the record. And I would just remind 
Members to direct their comments to the Chair.
    With that, the gentleman from California, Mr. Vargas, is 
now recognized.
    Mr. Vargas. Thank you very much, Mr. Chairman. I direct my 
comments to the Chair. You look great up there, sir, and of 
course, the ranking member always does. I would prefer her to 
be in the other seat, but it has been a pleasure to be here.
    Director, I think you have done a great job, I really do, 
and I think we owe you a great debt of gratitude.
    The hyperbole today has actually been rather remarkable. I 
have been here for quite some time, and sometimes people say 
rather ridiculous things, but today was particularly fun. They 
said that you were the greatest extortionist to the country of 
all time. Is that true, are you the greatest extortionist?
    Mr. Chopra. Obviously, that is offensive.
    Mr. Vargas. Of course, it is offensive.
    Mr. Chopra. But I want to just say that we and our staff 
try to discharge our public service obligations faithfully and 
to the best of our ability as we swear an oath to our 
Constitution and our country.
    Mr. Vargas. I wanted to give you an opportunity to react to 
that.
    Now, are you beating the stuffing out of the free 
enterprise system?
    Mr. Chopra. No. And in fact, we have made an emphasis about 
the importance of new entry, nascent entry, the ability for new 
players not to have to stumble through and hire so many high-
priced lawyers.
    Our country benefits when consumers have more choices and 
when honest businesses are protected from those who violate the 
law.
    Mr. Vargas. Of course. Now, here comes a tougher question.
    You were accused of, ``McCarthyism.'' Is it, ``Kevin 
McCarthyism,'' or, ``Joseph McCarthyism,'' and what is the 
difference?
    Mr. Chopra. I will withhold responding, Mr. Chairman.
    Mr. Vargas. Okay, we will leave that for another time.
    Mr. Barr. The gentleman will suspend. The Speaker is 
protected, so the gentleman will refrain from disparaging and 
using personalities.
    Ms. Waters. I hope that will include----
    Mr. Vargas. I certainly will, but the accusation was of, 
``McCarthyism.'' You heard it, I heard it, and it wasn't 
defined, so I wanted the definition.
    But I will be happy to move on. I do not want to disparage 
the Speaker in any way. In fact, we have been friends for 23 
years, and I respect him greatly. Thank you.
    I do want to ask you about this. Most of the questions 
today on the other side have been about the industry. They seem 
to think that the industry is not pleased with you, that you 
don't meet with them enough, that they don't like you because 
of some of your policies. Is it your job to please the 
industry?
    Mr. Chopra. My job is to execute the objectives of the law, 
to enforce the law and supervise for it fairly. We go 
overboard, and I think I have exceeded the types of engagement 
that some of my predecessors have engaged in. But, yes, there 
are certain times, particularly when there are law violations, 
that there will be disagreements.
    Mr. Vargas. Of course, there will.
    What is your duty to the consumers?
    Mr. Chopra. Our duty is to ensure, as the statute said, a 
fair, transparent, and competitive market and to faithfully 
discharge----
    Mr. Vargas. And I think you are doing a great job.
    How much money has your Bureau redirected back, gotten back 
to consumers, how much?
    Mr. Chopra. Over $17 billion.
    Mr. Vargas. And how many people has that affected?
    Mr. Chopra. Hundreds of millions.
    Mr. Vargas. Of course. And it is interesting that I don't 
get complaints from consumers, just the opposite, they say that 
you guys are doing a great job. And I appreciate the job you 
are doing.
    Now, I want to talk about remittances. Remittances, I 
think, are a problem, and the reason for that is hardworking 
Americans and other U.S. residents send money overseas. And 
when they do that, they don't know the full cost of those 
remittances--they are not easily understandable--and I think it 
is something important for your agency to work on.
    Mr. Chopra. One of the things when you go get a disclosure, 
sometimes these remittances can be charged--or, sorry--as no 
fee, but in reality the exchange rate might be adjusted, so it 
doesn't look like there is a fee, but there is really a cost to 
it.
    I also want to say, Congressman, that other nations, 
developed countries, have started thinking about, through their 
central banks, ways in which consumers and small businesses can 
transfer money more easily. There is some work between--I 
believe the Fed has an agreement with the Central Bank of 
Mexico. We should look at more partnerships like that, to have 
lower costs.
    Mr. Vargas. And lastly, we did talk about diversity. I did 
look at the numbers, however, and it looks like when it comes 
to--I think this is your Semiannual Report--when it comes to 
Latinos, the percentage is actually quite low. And I hope that 
you are taking a look at that.
    Mr. Chopra. Yes.
    Mr. Vargas. And I will let you answer if I have enough 
time, but I do want to make this comment. It is interesting, 
every time I come here, I hear the accusations that are placed 
against you or others on the other side. There is never 
protestation from the Chairs. I never hear it.
    And then, when you are defended, there seem to be 
protestations. I don't think that that is fair. I think you are 
doing a great job, and I hope that we are a little more careful 
with our language around here when we accuse people of 
McCarthyism, extortionism, and all of these other things for 
respected people like yourself.
    I yield back.
    Mr. Barr. The gentleman yields back. The time has expired.
    The gentleman from Pennsylvania, Mr. Meuser, is now 
recognized.
    Mr. Meuser. Thank you, Mr. Chairman. And thank you, Mr. 
Chopra. I talk to a lot of banks--small banks under a billion 
dollars, $5 billion, regionals, and super-regionals throughout 
Pennsylvania, and big guys on Wall Street--and they are really 
not happy with your agency. So, let's just start there. Across-
the-board, banks, from the largest banks down to the smallest, 
have many concerns.
    So, the idea that the CFPB is doing a great job is foreign 
to me, because every single bank I talk to--I am not talking 
about 3 out of 5; it is more like 19 out of 20. I assume you 
have some sort of reviews taking place, taking information in 
on your final rules to be responsive to the clientele that you 
are supposed to be helping.
    Mr. Chopra. Just to be clear, the clientele of the CFPB is 
not banks. The clientele is the public, and often, it is true 
that there will be differences with entities that we 
supervise----
    Mr. Meuser. Who serves the public? Do the banks serve the 
public?
    Mr. Chopra. Of course, they are important public----
    Mr. Meuser. So, they are a link in the chain.
    Mr. Chopra. Of course. And we want those who follow the law 
to be able to not get disadvantaged by those who don't. I hear 
your concerns, but at the end of the day, we have to make sure 
that our consumer protection objective----
    Mr. Meuser. You are going too far.
    Now, let's talk about Section 1071 that keeps coming up, 
how somehow, that is wonderful. I had a Small Business 
Committee hearing the other day, and we had four Republican and 
Democrat witnesses, and they all thought it was terrible, the 
type of questions that needed to be answered.
    Now, I know in the final rule, you have retracted some of 
the insane information that you wanted to derive, not making it 
required, but you are asking banks to ask for really personal 
information about people's race, and their sexual preferences. 
Where does that fit into looking out for the public good?
    Mr. Chopra. That is a statutory directive. We were under a 
court order to implement Section 1071 of the Dodd-Frank Act. It 
requires collection of information on race and other 
categories.
    Again, I appreciate that those are types of questions that 
sometimes are difficult. We tried to work with the industry to 
figure out what is the best way to limit some of that----
    Mr. Meuser. If you actually would do that, work with the 
industry to figure out the best way to provide guidance and 
oversight so they can handle and serve their customers best, 
but honestly, it doesn't sound as if you are doing that. I was 
in the business world, and the more you talk to your customers, 
the better of a company you become.
    So that is on 1071, but there is also 13 data points. The 
statute requires the collection of 13 data points while the 
rule requires 81. So, there is a lot of concern from banks, 
small business banks, primarily community----
    Mr. Chopra. Let me just make clear, there is not 81 data 
points. There is a difference between data fields. So, what we 
are trying to do is create----
    Mr. Meuser. I am going to reclaim my time. And if it is not 
81, then is it 50?
    Mr. Chopra. No. I believe it is about 19, 20-something----
    Mr. Meuser. Okay. Then, perhaps, I stand corrected. That is 
the information I have.
    Let me ask you about screen scraping. It should be 
addressed in the 1033 rulemaking. Fraud is a serious problem, 
as we all know. Can you update the CFPB's approach to screen 
scraping, and can the 1033 rulemaking address this practice?
    Mr. Chopra. Yes, I actually think we can. I think we can 
set the stage for making sure screen scraping is not going to 
be part of our financial infrastructure in the future. I think 
it is something we should all talk about, because I do think 
that screen scraping is not really a viable long-term way for 
data-sharing.
    Mr. Meuser. Great. I'm very happy to hear that.
    And I am just going to go back to 1071 quickly, if you all 
could just do some sort of analysis on the compliance costs, 
primarily for small banks because that is where they amount and 
they are more a percentage of their operating costs, if you all 
could do that and maybe we could talk about that, I would 
appreciate it.
    Mr. Chopra. I am happy to talk to you about it, including 
where we have created some changes in hurdles, but, yes, let's 
talk about it.
    Mr. Meuser. Great.
    Thank you, Mr. Chairman. I yield back.
    Mr. Barr. The gentleman yields back.
    The gentlewoman from Texas, Ms. Garcia, is now recognized.
    Ms. Garcia. Thank you, Mr. Chairman, and thank you, 
Director Chopra, for being here with us today. It is always 
good to see you. I am always glad to get an update from you, 
given your relentless--relentless--commitment to protecting our 
nation's consumers.
    Under your leadership, the CFPB has successfully worked on 
junk fees, medical debt, credit scoring, housing 
discrimination, and many other major issues. I have enjoyed 
reviewing your report. It is excellent and certainly is 
reflective of the fine work that you are doing.
    I would like to make sure that all Americans understand 
just what it is you are charged to do. I reviewed a useful fact 
sheet about the services that you offer our constituents, like 
free credit reports, protection from scams for older adults 
which is really key in my district, help with surprise medical 
billings that impact so many Americans across our country, and 
resources on mortgages and borrowing.
    I want to make sure that the word is getting out 
effectively, and I wanted to know how the Bureau makes sure 
that all Americans are aware of all the services, because there 
seems to be some confusion here as to exactly whom charged to 
advocate for.
    Can you provide us some more information on just exactly 
what your mission is?
    Mr. Chopra. Yes. We are there to make sure that the 
consumer financial protection laws are followed. We are there 
to make sure that consumers can file complaints and get them 
resolved.
    We are there to take enforcement actions to help those who 
have been ripped off. We have gotten refunds for tens of 
millions of Americans, and our work has helped so many more.
    Our job really is to give consumers the ability to have a 
market that really works for them.
    Ms. Garcia. So, you are there to help consumers when they 
get into a challenge with any retail outlet or a bank. This is 
not an anti-bank operation. You are there to help a consumer 
with a number of entities in all of their transactions.
    And I want to tell you, I am thoroughly impressed that you 
handle 10,000--10,000--complaints a week, and I know that you 
reviewed 745,400 complaints, just to make sure that the 
companies that you make the referrals to are responding 
effectively and really responding to the complaint. So, thank 
you for that.
    And I can tell you that I would hope that all of our 
agencies are that responsive to complaints and get to them as 
quickly as you do, so thank you for that.
    I also, like Mr. Vargas, however, did note in your 
workforce report, that Latino representation does fall short. 
The CFPB workforce is only 7-percent Latino compared to 13 
percent to the benchmarks of the United States Census National 
Survey of Labor Force. Further, Latino employees make up the 
lowest percentage of new hires, at 3.6 percent, compared to all 
the other groups. Can you tell me today, Director Chopra, what 
you will be doing to fix this problem?
    Mr. Chopra. Yes. We have a number of things in motion to 
make sure that we are attracting a diverse workforce at all 
levels, and we are very proud that we have senior Latino 
employees at the highest levels as well.
    I am happy to discuss that with you in more detail, but we 
want to make sure we are reaching everybody, that everyone has 
an opportunity to work for us. And I will say, making sure our 
workforce is reflective of the country will also help give us 
more connection to the people that we serve.
    Ms. Garcia. Great. Well, Latinos are the fastest-growing 
minority group in this country, and certainly have a big market 
share in terms of the growth as consumers, so thank you for 
that.
    I would also like to make sure that you are committed to 
working on this problem, and I will follow up with you, of 
course, in the future.
    Let's turn now to the small businesses, because that is 
another area where Latinos, especially Latinas, are the 
highest-growth area.
    The issues with your lending rules, can you please clarify 
why it is critical for the CFPB to advance rulemakings on 
lending?
    Mr. Chopra. Part of the reason we implemented the statute 
as required is to make sure that we have good data and the 
government and the public has good data about those trends.
    You are right, there are so many immigrants, minorities, 
and others who start businesses, franchises and others, and 
that data, I think, would have been critically helpful in the 
Paycheck Protection Program.
    Ms. Garcia. Okay. Just a quick one, how are we doing on the 
language barrier issues?
    Mr. Chopra. I will update you, but we are making progress.
    Ms. Garcia. Okay. Good. Thank you.
    I yield back.
    Mrs. Houchin. [presiding]. The Chair now recognizes the 
gentleman from South Carolina, Mr. Timmons, for 5 minutes.
    Mr. Timmons. Thank you, Madam Chairwoman.
    I want to get back to the data breach that Congressman 
Huizenga discussed with you earlier. Can you describe how the 
CFPB found out about this breach?
    Mr. Chopra. Another employee identified a specific 
indicator. It was reported to our team. We brought them 
together----
    Mr. Timmons. The breacher cc'd their manager in an email, 
and the manager caught it? Is that correct?
    Mr. Chopra. I don't want to go into anything related to the 
investigation, but it was another manager who identified----
    Mr. Timmons. Okay. And how long between that manager 
pushing this breach up the chain did you notify the quarter 
million Americans and 45 companies involved in the breach about 
their exposure? How long did it take?
    Mr. Chopra. We found some documents that did have consumer 
names. No information like Social Security----
    Mr. Timmons. Was it 24 hours, was it 72 hours, or was it 2 
months?
    Mr. Chopra. We didn't have their contact information.
    Mr. Timmons. So, you had their personally identifiable 
information, but you didn't have their contact information?
    Mr. Chopra. Yes, we just had very few pieces of----
    Mr. Timmons. But you didn't notify the companies, like you 
probably should have? Is that correct?
    Mr. Chopra. We did. What we did is, we partnered with the 
companies whose----
    Mr. Timmons. How long did it take you to partner with them?
    Mr. Chopra. I can look at the timeline, but as soon----
    Mr. Timmons. Was it 72 hours? The answer is no, it wasn't 
72 hours.
    Mr. Chopra. I think we tried our best to identify where we 
had any potential----
    Mr. Timmons. It wasn't 72 hours, and, again, you are 
responsible for enforcing cybersecurity breaches, and if a 
company----
    Mr. Chopra. We are not actually----
    Mr. Timmons. Well, you have sued----
    Mr. Chopra. But we do not enforce breach notification laws.
    Mr. Timmons. Correct. But when you fine companies for 
violating best practices, those companies are considered to be 
in egregious breach if they do not notify the consumers who 
were breached within 72 hours.
    Mr. Chopra. No, that is not accurate, but I am happy to 
follow up with you on that.
    Mr. Timmons. Okay. So if a company is breached and they 
don't notify anybody within 72 hours, you are not going to 
consider that an aggravating factor in whether to fine them and 
how much?
    Mr. Chopra. Generally speaking, the safeguards rule that 
governs financial institution breaches is enforced by other 
agencies. They are separately----
    Mr. Timmons. Okay.
    Mr. Chopra. This is a serious issue.
    Ms. Waters. Please allow the gentleman to answer the 
question.
    Mr. Timmons. If you would answer the question.
    Mrs. Houchin. [presiding]. It is the gentleman's 5 minutes.
    Mr. Timmons. Okay. I find it an egregious breach of best 
cybersecurity practices to have this information available to 
this individual in the way that it is.
    Do you believe, in retrospect, that the information should 
have been siloed, and it should not be that easy to email a 
document?
    Mr. Chopra. Yes. We are looking at making sure--we already 
have systems in place so that there is not the ability to 
transfer that. The issue can sometimes be when there are 
communications with the entity.
    Mr. Timmons. How many people have been fired because of 
this data breach?
    Mrs. Houchin. Will the gentleman pause for just a moment 
while we fix the clock?
    Mr. Timmons. Sure. I think I was at, like, 2:40.
    Ms. Waters. Do we know how much time was left?
    Mrs. Houchin. The gentleman can continue.
    Mr. Timmons. Okay. Thank you.
    Mr. Chopra. Do you want me to answer?
    Mr. Timmons. It is really concerning that you have this 
color of law, this theoretical authority to force these 
businesses to give you this information, and then you are 
unable to protect it, and the individuals who have been 
breached have no recourse. They are not going to get a 
settlement. They are not going to get any money.
    I already have a number of instances where people whose 
data was breached--these criminals have filed unemployment 
insurance claims, and they have already been damaged, and there 
is no recourse, because you are a governmental entity operating 
under the color of law. And I say, ``operating under the color 
of law,'' obviously, because there is a Supreme Court decision 
that we are expecting here pretty soon.
    What would you tell the individual who has been damaged by 
the CFPB's incompetence as it relates to the cybersecurity 
breach? What is their recourse? How will they be made whole? 
Are you going to write a check?
    Mr. Chopra. This is a very serious issue. And one of the 
things we are doing for consumers who are customers of the 
entity, is we are working with the financial institution to 
figure out----
    Mr. Timmons. Are you going to make them pay for the breach?
    Mr. Chopra. No, of course not.
    Mr. Timmons. Okay. Of course not? You make other companies 
pay for the breach.
    Ms. Waters. Please allow the gentleman to answer the 
question.
    Mrs. Houchin. It is the gentleman's time.
    Mr. Timmons. So, you are not going to write a check to make 
these people whole?
    Mr. Chopra. We are working with the institutions, and 
fortunately, the information that was transferred on an 
unauthorized basis did not have indicia of risk of identity 
theft.
    But I take your point that, of course, the data that is 
collected must be protected. This was a serious problem. The 
employee who was responsible--I can't go into details there--is 
not currently an employee anymore.
    Mr. Timmons. I will reclaim my time. Is that the best way 
to do it?
    So, Director Chopra, you are required to appear before this 
committee twice a year, meaning we will likely see you again in 
about 6 months. And with the pending Supreme Court decision on 
the constitutionality of the CFPB, it may very well be your 
last appearance before our committee. Please try to do the 
least amount of damage as possible between now and then. The 
American people would really appreciate it.
    Consumer Protection Financial Bureau: the quarter million 
consumers are not protected. You cause them damage, and they 
will never be made whole.
    With that, Madam Chairwoman, I yield back.
    Mrs. Houchin. The gentleman's time has expired.
    The gentleman from Illinois, Mr. Casten, is now recognized 
for 5 minutes.
    Mr. Casten. Director Chopra, it's nice to see you again. 
Thanks for coming in today.
    This is, in some ways, not at all germane to today's 
hearing, but now we have a whole subcommittee focused on crypto 
issues and lots of bills that we are discussing about how and 
where to regulate the crypto industry. I am not going to ask 
you to opine on all that.
    But it did catch my eye that you just issued a 2022 
complaint bulletin looking at complaints related to digital 
assets. And if I have this quote right, it says that you found 
that, ``fraud, theft, hacks, and scams are a significant 
problem in crypto asset markets that appears to be getting 
worse.''
    That was a year ago. And I would welcome your thoughts on, 
is that still true, and would you care to elaborate on what you 
found in that bulletin?
    Mr. Chopra. We are going to take another look at that 
dataset again.
    I guess I would say that fraudsters are trying to use 
methods of payment that are hard to track. Gift cards were a 
really common one before. There are other ways in which they 
have been used.
    But more in the digital world, we are seeing that crypto 
assets--in some ways, they might tell an elderly person, go buy 
this and transfer it to me. It can be done without the person 
going to a superstore or department store to buy a gift card, 
which means it can be faster. It can be bigger amounts of 
money. And that is certainly something we want to figure out 
how we to stop so we can protect those individuals who have 
been defrauded in a world where identity verification is 
challenging.
    Mr. Casten. When you say, ``we,'' I assume you are 
referring to the CFPB?
    Mr. Chopra. Yes. Frankly, law enforcement, the DOJ, 
others--as you know, fraud against older Americans in 
particular has been a pernicious problem.
    Mr. Casten. But are the crypto asset platforms working with 
you? Are they constructive partners in this?
    Mr. Chopra. That hasn't been a place where we have invested 
much effort. The way I understand it, and I can ask our staff, 
it that is being transferred outside of those platforms. So, 
that has not been a place where we have engaged.
    Mr. Casten. Following up on the prior question, I would 
assume that they have a lot of the data and they could either 
be constructive or not. Is there anything we can do to help?
    And you mentioned the elderly. Is the concern primarily 
with elder consumers who are being targeted, or are there other 
consumer groups that you are watching?
    Mr. Chopra. Yes. It is disproportionately those who are 
older. That is not to say that people of all walks of life are 
not at risk, especially when voices can be cloned. There are 
lots of ways to impersonate now.
    But certainly, romance scams, dating websites--that is a 
place where elderly and others are targeted. We have some 
evidence to suggest that those who are widows and widowers are 
more likely to be targeted.
    Mr. Casten. I appreciate your support. I am reminded that, 
I think probably about 3 years ago, your predecessor sat here, 
and in spite of repeated questions, refused to acknowledge that 
the CFPB has an obligation primarily to look out for the 
interests of consumers. I am grateful that we are prioritizing 
those interests.
    Out of curiosity, have you ever done the math on how much 
money do you think the Bureau has saved consumers since its 
conception?
    Mr. Chopra. Just in refunds, it has been $17 billion. But 
in terms of the reforms of the mortgage market and others--the 
ability now to get a competitive mortgage, it is totally 
different now, and it is hard to put a number on it.
    The ways in which I think we have stopped certain actors 
from engaging in system-wide harm--we don't have a dollar 
figure, but the benefits are very, very big.
    Mr. Casten. And in our office, we hear stories from 
constituent services about the veterans who are helped, the 
elderly, that you mentioned, and the folks who are not as 
proficient at working through these.
    Are there particular classes of consumers whom you think 
most depend on the work you do?
    Mr. Chopra. It's funny, the other weekend, I was in 
Virginia and was stopped at a restaurant. We had done an event 
at a local military base. And someone in the group who attended 
had mentioned that they had just gotten a $5,000 check. We 
occasionally hear from people who really were ashamed and 
thought that it was all their fault, but they were actually 
sometimes a victim of a scheme and got over $10,000 back. Some 
people have had their homes saved. So, it is not just the 
financial piece; it is also a huge amount of dignity for them.
    Mr. Casten. I appreciate it. I am out of time. But I hope 
you don't take personally some of my colleagues' attacks on 
you. The idea of looking out for veterans and students and the 
elderly may be partisan, but I am glad you are----
    Mrs. Houchin. The gentleman's time has expired.
    Mr. Casten. I yield back.
    Mrs. Houchin. The gentleman from South Carolina, Mr. 
Norman, is now recognized for 5 minutes.
    Mr. Norman. Thanks for coming, Director Chopra.
    On the civil investigative demands, a lot of the businesses 
that have been subject to it have said it was ill-defined, and 
it was onerous. Do you have an idea of, for actions that do not 
result in enforcement actions, the amount of money and time 
that the firms have had to bear to produce the information?
    Mr. Chopra. Yes. I don't have that offhand. But you raise a 
good point, which is, what are the ways in an investigation to 
get the information to ascertain if there is a violation 
without it being costly or, frankly, taking a lot of time? This 
is especially concerning for----
    Mr. Norman. Is CFPB required to provide the company with 
credible evidence that there has been a violation of the law 
prior to serving a criminal investigation?
    Mr. Chopra. The statute is consistent, I believe, and 
actually may be enhanced compared to other civil investigative 
demands (CID) authorities around the government. We are 
required, I believe, to state a notification of purpose that 
really gives a sense of what we are looking for.
    Mr. Norman. Is it law? Can you cite the law that has been 
violated before you do a CID?
    Mr. Chopra. Yes. In the notification, we will sometimes be 
able to describe the particular type of violation that----
    Mr. Norman. All the time or just sometimes?
    Mr. Chopra. I would need to check.
    Mr. Norman. Could you get back to me in writing on that?
    Mr. Chopra. Sure.
    Mr. Norman. Now, on the Fair Debt Collection Practices Act 
and the Fair Credit Reporting Act, they are basically silent on 
the treatment of medical debt and if that differs from any 
other debt. The CFPB has drastically altered the collection of 
unpaid medical debt.
    What in the Fair Credit Reporting Act gives the CFPB 
authority to encourage furnishers to report inaccurate 
information about legally-owed and legitimate debt?
    Mr. Chopra. Actually, no. It is just the opposite. Our push 
is accuracy. The Fair Credit Reporting Act requires reasonable 
procedures to ensure maximum possible accuracy. There actually 
is a provision that is related to health as well in there.
    Mr. Norman. So, the CFPB has not made any efforts to 
rewrite portions of the Fair Credit Reporting Act as far as the 
reporting of unpaid medical debt?
    Mr. Chopra. The statute is Congress' to change. When it 
comes to accuracy of furnishing on credit reports, that is an 
incredibly important responsibility for the enforcement 
agencies, the States, and others. We do not want the credit 
report being a way to coerce people into paying something they 
already paid or didn't owe in the first place.
    Mr. Norman. So, you basically are hands-off with trying to 
rewrite that, as I stated?
    Mr. Chopra. We cannot rewrite statute. We are trying to 
administer the Fair Credit Reporting Act, enforce it fairly, 
and there are real problems when it comes to----
    Mr. Norman. Let me ask you this. On the $8--I think they 
have been called junk fees--but the credit card late fees, in 
your rulemaking, you say that it is not a cap, but people need 
to show their work to get--to approve the fees that are 
charged. How do you define that? What process?
    Mr. Chopra. Yes. It is not a preapproval. What we have done 
is put in the proposal--and the same thing exists currently in 
the Fed's rule promulgated over a decade ago--that if you don't 
want to use the immunity provisions, where you don't have to 
show any work at all, you will have to spell out your 
calculations based on what it is. As one of your colleagues 
mentioned, the statute says the fees must be reasonable and 
proportional.
    Mr. Norman. ``Reasonable,'' as defined by whom?
    Mr. Chopra. It could be through case law. But one of the 
things we are trying to do is to provide clarity and 
predictability for businesses to spell out how they can make 
sure they can comply with it.
    When Congress passes laws with words like, ``reasonable,'' 
it can be a benefit to businesses that they know how that is 
going to be interpreted.
    Mr. Norman. How is that different----
    Mr. Chopra. That is what we try and do all the time.
    Mr. Norman. Yes, but, ``reasonable,'' is kind of like, 
``beauty is in the eyes of the beholder.'' The criticism of the 
CFPB is the fact that it is vague. People are getting hit with 
CIDs that they don't understand. It is just vague as 
interpreted by the CFPB.
    Mr. Chopra. That is exactly why we have tried to provide 
more advisory opinions and guidance so that people know what is 
expected of them without creating new obligations.
    Mr. Norman. In this country, small businesses are under 
tremendous stress now, and I would just--please don't----
    I yield back.
    Mrs. Houchin. The gentleman's time has expired.
    The gentlewoman from Massachusetts, Ms. Pressley, is now 
recognized for 5 minutes.
    Ms. Pressley. Thank you, Director Chopra, for joining us 
today. And thank you for the critical role that the CFPB plays 
in protecting consumers and holding bad actors accountable. I 
am grateful to you and your dedicated 1,500-plus employees.
    Tomorrow is actually World Elder Abuse Awareness Day. And 
my mother, for many years, was a social worker to the elderly, 
trying to protect them from elder abuse. So, I did just want to 
take a moment in particular to thank you for all that the CFPB 
does specifically around fighting elder fraud, exploitation, 
and abuse. Thank you for all that you do for our most-
vulnerable veterans, seniors, and students.
    Speaking of another vulnerable group, Director Chopra, a 
recent New York Times review of hundreds of Federal lawsuits 
filed against tenant screening companies highlighted how a 
pattern of inaccuracies in these reports led to the denial of 
rental housing for people across the United States.
    What problems has the CFPB found with tenant screening 
reports and the impact they can have on finding affordable, 
quality housing?
    Mr. Chopra. I think when someone is falsely matched with 
the wrong report, it is almost like they have been given a 
different identity. And that can be relied on to foreclose them 
from even accessing rental housing, and in some cases, we have 
heard of it leading to homelessness.
    We have to make sure that, when there are these third-party 
dossiers collected about people, that they are actually 
accurate. We have found, Congresswoman, that people with common 
surnames are more likely to be victims of this, and we have to 
make sure the law is being followed.
    Ms. Pressley. Thank you. Clearly, a lack of regulation in 
the tenant screening industry is resulting in inaccurate 
reports and false information, particularly about people's 
criminal backgrounds. However, even when the reports do include 
accurate information, housing providers often use them to deny 
housing to people with a record: 70 million people in the 
U.S.--one in 3 adults--have a criminal record, which means the 
impact of this discrimination is severe and widespread.
    Formerly incarcerated people are 10 times more likely to be 
homeless than the general public. And this is not a 
coincidence. It is a policy choice, one with dark consequences.
    Director Chopra, is the issue of denying housing to people 
after they have completed their sentences a problem that you 
have heard about?
    Mr. Chopra. It is. And I think that is something that the 
Department of Housing and Urban Development, and the Justice 
Department, have also been working on.
    Ms. Pressley. Thank you. When formerly incarcerated people 
do not have stable housing, it is hard for them to access 
healthcare, secure a job, or pursue greater education. 
Additionally, a lack of stable housing can lead to crimes of 
necessity to meet basic needs. So, the cycles of recidivism 
repeat.
    That is why today, I, along with Representative Tlaib, am 
introducing the Housing for Formerly Incarcerated Reentry and 
Stable Tenancy Act, or the Housing FIRST Act. Our legislation 
would disrupt the prison-to-homelessness pipeline by regulating 
what information relating to a person's criminal background 
should appear on a tenant screening report.
    Director Chopra, do you agree that by regulating the tenant 
screening industry on this matter, we can improve access to 
affordable quality housing and confront the prison-to-
homelessness pipeline?
    Mr. Chopra. I think what you have said about the 
disruptions about returning home and not being able to access a 
home are so serious. I look forward to working with you on 
that. And there is so much at stake to make sure that people 
who have served can really successfully reenter.
    Ms. Pressley. Thank you. Again, thank you for what you do 
day in and day out to protect consumers and to hold bad actors 
accountable for the harm they cause our most-vulnerable people. 
And thank you for your expressed partnership on this matter.
    Housing is a human right, period. And when we deny stable 
housing to people with criminal records, we wrongfully punish 
them after they have already completed their sentences. Our 
bill would remove unjust barriers to housing and affirm that 
safe, stable housing is essential. Thank you.
    And I yield back.
    Mr. Fitzgerald. [presiding]. The gentlelady yields back.
    We will now go to Congressman Davidson for 5 minutes.
    Mr. Davidson. Thank you, Director, for being here.
    And I thank my colleague for her concerns about people who 
have served their sentences and done the time for their crime. 
It wasn't the question I was planning to lead with, but it is a 
good segue to something I had sent a letter to you on in April, 
and I appreciate your response.
    Your response really dealt with the accuracy, and I think 
everyone wants them to be accurate. We don't want someone to be 
falsely denied residence. We also don't want someone to come in 
who maybe should have been screened out. So, we want accuracy.
    But fundamentally, do you believe that tenant screenings 
are valuable to landlords?
    Mr. Chopra. I think when they are fully accurate, it has a 
very different benefit. There are ways in which people can get 
information about a tenant. But I will tell you, the Fair 
Credit Reporting Act has accuracy standards, and I want the 
tenant screening industry to follow them carefully.
    Mr. Davidson. Yes. I agree they should be accurate. But 
sometimes, the quest for accuracy is really just using the law 
to prevent people from doing screenings in the first place.
    We had a great Second Chance Program in the businesses that 
I owned prior to coming to Congress. I am passionate about the 
Second Chance Program. Once you have served your sentence, you 
need to be fully integrated into society; otherwise, they got 
the sentencing wrong.
    So, it is a valuable thing. And it started with trust. 
Somebody was honest about their background. We checked it. It 
matched. Now, we have built trust. I think it can be important.
    Turning to things that we probably are more aligned on, I 
was pleased, even in your opening remarks, that you talked 
about data brokers. And when you look at common concerns that 
we have had that have been bipartisan about privacy, American 
citizens have had their data stolen, hacked, sold, and 
otherwise exploited.
    So, I was encouraged that on March 15th, the CFPB announced 
a Request for Public Input regarding how data brokers collect 
and sell personal consumer information. Last week, I saw that 
you even extended the comment period to July 15th.
    Could you give us an overview of what you are seeing so far 
regarding the data broker industry and how they collect and use 
personal consumer data?
    Mr. Chopra. In the 1960s, this committee, I believe--it had 
a different name--was concerned, and other committees were 
concerned about all of these firms creating dossiers about us. 
And the Fair Credit Reporting Act sometimes focuses a lot on 
the three big credit bureaus.
    But there are more and more companies now that are 
assembling this information, especially collecting it 
digitally. They are selling it, and it is being used for all 
sorts of purposes, including employment insurance and so much 
more.
    We are trying to make sure we know what the new business 
models are that they are using? We do know that there is a lot 
more of them, and many of them may be doing things that are 
covered by the Fair Credit Reporting Act.
    So, I hope this committee really thinks about privacy data 
brokers altogether because what we did, I think 50 years ago, 
was important, but it has to be modernized for the age of Big 
Tech.
    Mr. Davidson. Absolutely. I think there is definitely an 
urgent need for legislation. I think the Fourth Amendment 
protection of privacy is probably the most-abused current 
portion of the Bill of Rights, not that there aren't other 
portions that are under stress.
    You recently noted in remarks at Money20/20 last year that 
the Bureau will be, ``exploring safeguards to prevent excessive 
control or monopolization by a handful of firms. Over the last 
several years, a consortium of the largest financial 
institutions in the U.S. has sought to exert governance over 
data ecosystem and sometimes serving as mandated intermediaries 
between peer-to-peer consumer transactions, thus decreasing 
competition and consumer choice in the marketplace.''
    How do you assess this situation as you address the 
Bureau's goal of providing consumer choice, and frankly, the 
ability of people to protect the privacy of their own financial 
data?
    Mr. Chopra. What you should expect about how we implement 
the statute--and I have shared this with some of you--is we 
want to propose that there are going to be some restrictions on 
secondary uses, so if you are moving your data to someone, they 
should only be using it for the purposes that are permitted. We 
have to figure out how to enforce this properly. We also want 
to think about how to make sure that an intermediary doesn't 
take the data, send the data, but then use it themselves.
    It is not going to be totally easy, but I think we have a 
framework that will get support, and I expect we will propose 
it for comment in October. But the data protection element of 
this is huge.
    Mr. Davidson. Yes. Thank you. And the enforcement mechanism 
is really the challenge. We have our own bill, the It's Your 
Data Act, that recognizes the property right in your individual 
data. So, I look forward to continuing to work with you on 
privacy.
    I yield back.
    Mr. Fitzgerald. The time has expired.
    I will now recognize the gentlewoman from Michigan, Ms. 
Tlaib, for 5 minutes.
    Ms. Tlaib. Thank you so much.
    Director, thank you for being here. Your agency--I won't 
call it an organization--is the only financial regulator that 
is laser-focused on consumer protection, correct?
    Mr. Chopra. That is right.
    Ms. Tlaib. You were created, why? Because there were all 
these bad actors. They were out of control. We had to do 
something about it because people were calling us. It wasn't 
just mortgage fraud. It was so many other things. Is that 
correct?
    Mr. Chopra. And there was a global financial crisis caused 
by that.
    Ms. Tlaib. That is right. I read somewhere that the CFPB 
enjoys overwhelming bipartisan support outside of Congress. 
Something like 75 percent of Republicans actually support the 
work that the Consumer Financial Protection Bureau does.
    I think it is because you did about $17 billion in relief 
for over 200 million consumers through the Bureau's enforcement 
and supervisory activities. And that is why I don't think I am 
surprised by those statistics.
    I actually wanted to look it up, because I know I have 
referred constituents to the Bureau, and the Bureau has been 
very incredibly helpful, especially because I think you all 
actually read the small print of things that get sent out to 
our consumers. Our residents just don't know what their rights 
are.
    I want to talk about the credit card fees, because ever 
since you told me what you are doing on that, I have been 
bragging about it, because I think it is so important to show 
that the Federal Government has your back. That there is this 
agency that we are independently funding that specifically is 
working on this.
    I think the proposed rule on Regulation Z would likely save 
cardholders billions of dollars each year. I read something 
around, what, roughly $12 billion annually?
    Mr. Chopra. That is right.
    Ms. Tlaib. Director Chopra, when I read that for some 
credit card agencies, it is kind of part of their business plan 
that 40 percent of their profit or something crazy--I don't 
know, you might have to correct me--is from late fees. They 
literally have built a profit line specifically all about 
generating profit from late fees. Can you talk about that?
    Mr. Chopra. I just think what Congress wanted when passing 
that law over a decade ago is just some common-sense 
safeguards, that the credit card industry can charge interest, 
can charge fees, make a profit, but when it is designed to 
build a business on penalties, lenders should want their 
customers to pay back and pay on time. We don't want a system 
where people are happy when someone doesn't pay on time or if 
they missed it by a day. All we are looking for is something 
balanced and reasonable.
    Ms. Tlaib. I know I looked, and it really does impact some 
of our working poor communities regarding the late fees. They 
are paying twice as much as any other cardholder.
    I also have been incredibly thankful that--and, again, the 
Bureau didn't have to do this--your report on medical debt 
literally triggered all three of the major the credit reporting 
agencies to do something.
    Can you talk about the fact that you did this study that 
basically said, this is the impact of having medical debt on 
people's consumer reports, and it was pretty drastic. I think I 
saw something like $88 billion in medical debt is on consumer 
credit records, which impacts housing, employment, you name it. 
The credit score and report is used for so many things, 
including auto insurance rates, as we talked about.
    Can you talk about that study? And, I think, days after you 
released that study, what happened?
    Mr. Chopra. Yes. Shortly after the three credit reporting 
conglomerates agreed to really drastically limit what is 
showing up, they also delayed when it would show up. Because 
often the consumer is just sort of debating and dealing between 
the insurance company, the provider, the facility.
    I just think we want to make sure that that credit report 
is not a place that you could threaten someone to pay something 
that they don't owe. But we still have to make sure we look at 
accuracy standards across-the-board. I also hear there are 
other types of bills that show up, that may not actually be 
accurate.
    Ms. Tlaib. Yes. That is the thing in the report I read. 
Something around--over the last decade or so--maybe from 2005 
to now--that there has been a 31-percent increase in inaccuracy 
of medical debt because, basically, people are being misbilled 
and all this stuff and that this is happening.
    Do you support prohibiting and banning medical debt on 
people's credit reports?
    Mr. Chopra. I think we are going to be proposing some more 
safeguards on it.
    It is interesting, medical debt is ill-defined because it 
is also medical credit cards. Also, medical debt can show up in 
other types of debt. So, we are trying to work on the 
specifics.
    Ms. Tlaib. Yes. Director, I was shocked to find out that 
our VA sends medical debt of our veterans to credit reporting 
agencies--collection agencies.
    Mr. Chopra. Yes, although they have made some dramatic 
changes.
    Mr. Fitzgerald. The gentlelady's time has expired.
    Ms. Tlaib. I know. But it is very, very disturbing.
    Thank you. I yield back.
    Mr. Fitzgerald. Next, we will go to the gentleman from 
Wisconsin, Mr. Steil, for 5 minutes.
    Mr. Steil. Thank you very much, Mr. Chairman.
    Thank you for being here, Director Chopra.
    I want to dive right in. As you know, FSOC's SIFI 
designation is a serious authority that carries with it 
significant regulatory supervisory burdens. That is why 
Congress and the courts underscore the importance of the 
analytical rigor and due process as part of the designation 
decision.
    In your statement accompanying the announcement that FSOC 
would change its approach to the SIFI designation, you wrote 
the following, ``In 2019, FSOC effectively repealed the ability 
to designate systemically important nonbank financial 
institutions by adding an array of dubious process 
strictures.''
    In your view, do these strictures include cost-benefit 
analysis?
    Mr. Chopra. The guidance is up for comment right now, the 
changes. Of course, there should be a fair process and a very 
analytically-driven process.
    Mr. Steil. I appreciate that. There absolutely should be.
    You said it added an array of dubious process strictures. I 
am trying to get an understanding of what you view as these 
strictures, and do those strictures include the cost-benefit 
analysis?
    Mr. Chopra. I wasn't referring to that. I believe what I 
was referring to--in the 2019 guidance, it set up a number of 
additional hoops.
    Mr. Steil. Understood. But specifically, is the cost-
benefit analysis inside your dubious process analysis or 
outside?
    Mr. Chopra. No, I wasn't referring to that when I was 
referring--I was referring to the stages at each level of 
review. And my concerns, I believe, are shared in writing by 
the Secretary of the Treasury.
    Mr. Steil. Okay. I just want to make sure that you don't 
view the cost-benefit analysis----
    Mr. Chopra. No, I was not referring to that.
    Mr. Steil. ----as dubious, because I think that cost-
benefit analysis is a really important component of our 
regulatory oversight.
    Let me shift gears to a slightly different topic but one 
you speak a lot about, your term, ``junk fees.'' There has been 
a lot of discussion today about that and your efforts to extend 
CFPB's reach into everyday American lives, using what I believe 
is a very vague term. And it is still not clear to me what the 
term, ``junk fee,'' is based on.
    In previous explanations, you argue that our government 
sometimes charges its own citizens junk fees. And I am 
concerned here that the CFPB's proposed restrictions on credit 
card late fees--whether or not that is your term of a junk fee.
    Nobody likes paying late fees, and you don't want people to 
get into financial distress. But I am also trying to look at 
what the trade-offs are here in your cap on fees. I know one of 
your proposals has an $8 cap on fees.
    And I think the question is, do you acknowledge there are 
potential significant trade-offs associated with setting a cap 
on late fees?
    Mr. Chopra. First, to be clear, the $8 proposal is not a 
cap on late fees.
    Mr. Steil. Okay.
    Mr. Chopra. That is the immunity provision, so that 
companies that charge $8 or less do not have to worry----
    Mr. Steil. So, you are creating a safe harbor, $8 or less, 
under that proposal?
    Mr. Chopra. Exactly.
    Mr. Steil. So, it is not a cap. But you are saying, hey, if 
you are under $8, you are safe. Safe harbor. If you are over 
$8, we may or may not come after you.
    Mr. Chopra. No, that is actually not how it is. If you are 
not on the $8, we explain what you should be prepared to 
calculate so you can get certainty.
    Mr. Steil. Okay.
    Mr. Chopra. Congress prohibited unreasonable and 
disproportionate penalty fees. We are trying to provide 
clarity. And it was clear the rule we inherited was way overdue 
for review. There was so much technological progress and 
changes in the credit card market that had to be reflected.
    Mr. Steil. Understood. Going back to my original question 
on this topic, do you believe there are potential trade-offs in 
setting a cap?
    Mr. Chopra. Yes. What I think will happen is that we will 
start seeing things--rather than a business model built on 
penalties, they will compete just like other banks and small 
banks do who offer credit cards, which is really upfront on 
annual fee, on interest rates, and others. I think the 
competitive process will work better. Consumers are smart, more 
likely to switch, and will be healthier over all.
    But we are looking----
    Mr. Steil. So, you don't think that by setting a cap--just 
as we play this out analytically, doing a pure economic 
analysis on this--that you are going to lead to more-expensive 
credit?
    Mr. Chopra. It depends on the competitive factors. You will 
see consumers switched based on that. It really depends on the 
econometric model. But we are looking at all the comments, and 
we will look at it very carefully and analyze it before 
finalizing it.
    Mr. Steil. In my final 15 seconds--and I have asked you 
this before--do you believe the CFPB possesses regulatory 
oversight authority over insurance products or insurance 
companies?
    Mr. Chopra. We do not regulate the business of insurance.
    Mr. Steil. Thank you very much.
    Mr. Chairman, I yield back.
    Mr. Fitzgerald. The gentleman's time has expired.
    We will now go to the gentleman from North Carolina, Mr. 
Nickel.
    Mr. Nickel. Thanks so much, Director Chopra, for being 
here. I know with these 5 minutes for questions, it is tough to 
kind of get everything out in the time that you have. I am 
going to say a few remarks, but I want to just give you a beat 
to think about it. After I say a few things, if you want to 
jump in and supplement some of the comments you have made on 
some other things, I am happy to give you some time.
    But I want to just start off by saying that I was proud to 
sign on to the amicus brief led by Ranking Member Waters 
supporting the CFPB at the Supreme Court. I know you have been 
under attack here today, so I want to just thank you for all 
the work you are doing to protect consumers.
    Do you want to take any time to talk about--get a little 
more time on some of the----
    Mr. Chopra. Yes. I know we have talked about the work we 
have been doing, but I also want to make sure we are thinking 
about the future, too.
    We are seeing very big players, especially tech companies, 
come in. We are seeing the future of money look different. 
Digital payments. Artificial intelligence. It is so important 
that we think about tomorrow and make sure that we don't have 
problems in the future that we can address today.
    Mr. Nickel. Thanks so much. North Carolina has 13 
congressional districts. I represent 49,000 veterans in my 
district. And I want to thank you, again, for the work that the 
CFPB is doing to protect servicemembers and veterans. I think 
it is our duty to support and care for the men and women who 
have served our country. We owe them a debt of gratitude, and 
we have to ensure that they have access to the resources and 
support they need to lead fulfilling and healthy lives after 
their service.
    In June 2022, the CFPB issued a report highlighting 
complaints by servicemembers and veterans about problems with 
coercive credit reporting and false medical bill collections. I 
am very concerned that veterans and servicemembers that I 
represent, just like anyone, have a tough time navigating the 
credit reporting system. If a member of the military has been 
injured or hospitalized while in service, I don't think it is 
right for a medical bill to affect their creditworthiness.
    What trends did the CFPB observe in its report, and what 
type of relief or remedies would you recommend to support 
veterans?
    Mr. Chopra. Yes. Credit reporting--and let me just share 
that we do see differences between active-duty servicemembers 
and their families, and Guard and Reserve versus veterans. Each 
has unique issues.
    I would say with active duty, the implications for problems 
on their credit report are very real. It can even harm their 
career. Many of them are subject to Permanent Change of Station 
(PCS) orders, and have to move frequently, which makes it 
really challenging to make sure that they don't suffer problems 
when they need to move or sell their home. With veterans' VA 
mortgages and other VA benefits, we always want to make sure 
they don't become a haven for abusing people.
    We have done a lot of work on the Servicemembers Civil 
Relief Act, which has a 6-percent cap on pre-service 
obligations. We found Guard and Reserve families aren't always 
taking advantage of it and may not be--financial institutions, 
we want them to work more to honor those rights.
    Mr. Nickel. Thanks. I am also very concerned about the rise 
in abusive debt collection practices, including those that 
target low-income seniors, such as, ``zombie mortgage'' debts. 
Zombie mortgages are those that consumers thought were forgiven 
or satisfied long ago but still exist.
    I was pleased to see that the CFPB held a field hearing on 
this issue in April. Can you tell us what you learned at the 
hearing and more about the CFPB's work in this area to protect 
homeowners targeted by these unfair collection practices?
    Mr. Chopra. We heard from a lot of experts, including one 
homeowner who testified about how they got a mortgage--one of 
those 80/20 piggyback mortgages--before the financial crisis. 
She got it modified, and the second mortgage was satisfied. But 
then fast-forward, with no communication, I believe, for over a 
decade, and now she is getting threatened with foreclosure.
    I think these second mortgages, which many people believe 
were satisfied, are now coming back. And we have tried and 
issued some guidance to make it very clear that when there is 
time-barred debt, there are certain responsibilities. We do not 
want to see this unlawful debt collection behavior especially 
targeting those whose wealth is mostly their home equity.
    Mr. Nickel. Thanks so much.
    And I yield back.
    Mrs. Houchin. [presiding]. The gentleman yields back.
    The gentleman from Wisconsin, Mr. Fitzgerald, is now 
recognized for 5 minutes.
    Mr. Fitzgerald. Director, thanks for being here today. I 
wanted to just go to two different topics, the first being 
something that has already been talked about ad nauseam, but 
the credit card late fees. Specifically because I have 
corporations in my district, and Kohl's Department Store is 
probably the best example.
    I am worried that the rule could have a negative impact 
because I don't know if the differentiation is there between 
bank cards and what you might see with retail, and I am 
wondering if you all have looked at it from that perspective?
    Mr. Chopra. It is a great question.
    With store credit cards, you are right, the market is a 
little bit different than the generally-available bank cards. 
They do work with the financial institution to issue it, to 
provide all the statements and the underwriting. A department 
store like Kohl's will probably work with them. There is 
different demographic--different loan characteristics of it. We 
certainly tried to look hard at those differences when shaping 
the rule.
    At the end of the day, though, a reasonable late fee and 
making sure that there are incentives for consumers to pay, I 
think will be good.
    I will also tell you, those retailers incur some real 
damage sometimes when their customers are not being treated 
fairly by their financial institution partner. So, I am hoping 
that the retailers themselves can also see some benefits from 
this.
    Mr. Fitzgerald. Okay. Thank you for that.
    And then, I am not sure if other members touched on this, 
but I think for some members of the committee--maybe they have 
the answers they want. But regarding the SVB failure, kind of 
that whole weekend that happened--we are 100 days out now. The 
FDIC, the Fed, the Treasury--I don't think we got the answers 
we need from them.
    My question would be, what was your role? Maybe, it was ad 
hoc and kind of developing as that weekend played out?
    Mr. Chopra. Certainly, as a board member--there are five 
members of the board that have to steward the Deposit Insurance 
Fund and take those emergency actions. We were often meeting 
late and taking votes in the middle of the night. It was a very 
fast-moving situation. These entities, I am all familiar with, 
because they are also large banks subject to the CFPB's 
oversight.
    Mr. Fitzgerald. Right.
    Mr. Chopra. We had real issues, and the decision to insure 
uninsured depositors on an emergency basis was a very, very 
serious one. We do think it created some stability in the 
system, but we need to make sure that we are ready for future 
runs like this and that the system is resilient and 
appropriately capitalized.
    Mr. Fitzgerald. Specifically, what is your memory about 
what happened on March 12th at that FSOC meeting? What happened 
during that meeting?
    Mr. Chopra. Was that on a Sunday, maybe? We were all 
working around the clock. We were regularly in touch--the FDIC, 
the Fed--with the Treasury because those emergency powers 
required the consent of the Secretary.
    Anytime there is major movement like this, obviously, there 
is the worry about credit sweeps as well, and we did exchange 
information about the latest intel that we had. I don't know 
the specifics of it, but we certainly like to share 
information.
    Mr. Fitzgerald. Do you feel like decisions were made in 
that there were already--there was already movement on trying 
to sell or save the banks at that point by the time the FSOC 
meeting happened in mid-March?
    Mr. Chopra. I don't remember when the FSOC meeting was, but 
certainly, the failure of Silicon Valley Bank happened at 
around 11:00 a.m. on Friday. It didn't even make it to the end 
of the day. Signature Bank barely made it through and ended up 
failing on Sunday.
    It is not like a normal bank failure where there was clear 
awareness well in advance and the entities can prepare for the 
resolution in the same fashion and find buyers.
    The First Republic resolution was quite different. The 
closure and sale happened over the same weekend, but the speed 
in which SVB occurred was lightning fast. And we did not get, I 
believe, a valid bid submitted that weekend. But over time, 
after the emergency actions, we were able to.
    Mr. Fitzgerald. Okay. Let me ask you a huge question. It 
will be difficult to answer in half a minute. But what is your 
opinion now of where we are at, not just related just to banks, 
but all financial institutions? Is the market stable? And are 
regional banks in a good position as well?
    Mr. Chopra. I think what we have seen is that deposit 
outflows have really stabilized. We are not seeing broad 
movement. We did see a big pool--a big hunk of deposits move to 
money----
    Mrs. Houchin. The gentleman's time has expired.
    Mr. Fitzgerald. Thank you.
    Mr. Chopra. I am happy to talk to you further.
    Mr. Fitzgerald. Thank you.
    Mrs. Houchin. The gentleman from New Jersey, Mr. 
Gottheimer, is now recognized for 5 minutes.
    Mr. Gottheimer. Thank you, Madam Chairwoman.
    And thank you, Director.
    Director, I have previously shared my concern that the 
CFPB's consumer complaint database may be a breeding ground for 
consumer misinformation, where competing small businesses can 
file false complaints about competitors. In 2022 alone, the 
CFPB reported receiving nearly 1.3 million complaints.
    I understand that companies have an opportunity to respond 
to complaints that are filed with the database, but is there a 
vetting process in place at the Bureau to weed out false 
complaints submitted to the website so that these small 
businesses aren't playing defense for those competitors who are 
trying to get them?
    Mr. Chopra. Yes.
    Mr. Gottheimer. Can you talk a little bit more about that?
    Mr. Chopra. Sure. You actually raised this in a previous 
hearing, and I went back to the staff to make sure I fully 
understood it.
    When a company is enrolled in the complaint database, when 
a complaint is received, they are actually able to determine, 
is this even our customer or not? So, that is a key check to 
make sure that there is not any kind of false identification. 
In some cases, more information is needed.
    After you raised it, I also looked to see if there were any 
other indicia of this happening, and we did not see any, but we 
are always looking to make sure that is processed----
    Mr. Gottheimer. So before it is posted, they can stop it 
from being posted?
    Mr. Chopra. It is only posted under certain circumstances, 
and I believe one of the circumstances is that it is actually 
the customer.
    Mr. Gottheimer. Got it. So before it is even posted, you go 
back to the business and say, is this a customer of yours?
    Mr. Chopra. Actually, the way it works is if a consumer 
files it, it almost immediately goes to the entity enrolled in 
our portal. They are able to respond. And it doesn't show up in 
the database until well after. So, there are a bunch of checks 
to limit this.
    Mr. Gottheimer. Got it. So if it is a competitor and not a 
customer, they can stop it from being posted?
    Mr. Chopra. Yes. I don't think it could even show up 
because it is not a customer.
    Mr. Gottheimer. Okay. That is good to hear. And I will 
follow up----
    Mr. Chopra. I will verify, but----
    Mr. Gottheimer. I would like to follow up with you on that. 
That would be great.
    The CFPB's Office of Servicemembers Affairs helps military 
families overcome unique financial challenges and ensures they 
make the best financial decisions.
    Late last year, the CFPB reported that members of the 
Reserve and the National Guard are paying an extra $9 million 
in interest every year because they are not provided their 
rights under the Servicemembers Civil Relief Act (SCRA) to 
request interest rate reductions on loans during active duty.
    Since that report was published in December of last year, 
can you tell me a little bit about what steps you have taken to 
inform servicemembers and financial institutions of the 
benefits provided under the SCRA?
    Mr. Chopra. We did share that report with the financial 
institutions. And it is tricky--many people may not know that 
the Guard and Reserve, when activated, get the benefits 
afforded to active duty. There is a database that the 
Department of Defense makes available. We have shared 
information about how financial institutions can use that.
    In some cases, many of them are automatically given those 
benefits, and I think that is a huge benefit, especially for an 
individual who has been activated, they want to minimize the 
amount of bureaucracy they have to go through.
    Mr. Gottheimer. Of course. Thank you.
    The Supreme Court is expected to rule on the 
constitutionality, as you know, of the Bureau's funding 
mechanisms in the coming months. I believe the Bureau plays an 
important role in protecting consumers from illegal activities 
in the marketplace, and I think it is vital that we be prepared 
for all potential decisions of the court.
    If the Supreme Court rules against the Bureau, what will 
the impact be for consumers? And do you think it is important 
that Congress start to act now to be prepared to promptly 
address a potentially unfavorable outcome?
    Mr. Chopra. We have heard from many corners of the industry 
that if there is a decision that throws uncertainty into--many 
industry players rely on the certainty afforded by, especially 
our mortgage rules. We do not want to see disruption in our 
mortgage markets, especially in the environment in which we are 
in.
    I am happy to talk to you further about it. But the 
Solicitor General has filed a brief with the Supreme Court and 
laid out the argument about why they would--
    Mr. Gottheimer. Do you think we need to start taking 
congressional action to prepare in case the mechanisms change?
    Mr. Chopra. I will take that back. I am happy to take a 
question for the record. But really, we are focused on the 
litigation and how----
    Mr. Gottheimer. Okay. I would like that. Because I don't 
want to find that suddenly the court rules, and then we have to 
scramble. You know, we don't exactly always move very fast 
here.
    I have heard stories about consumer financial services 
offered by unregulated scammers, some of whom operate online, 
and offshore, beyond the reach of State and Federal regulators.
    Does the Bureau place a priority on detecting and deterring 
unregulated financial services operators, and can you give me 
some examples of the steps you are taking in the last few 
seconds here?
    Mr. Chopra. Sure. One of the key things is, outside of the 
insured bank and credit union system, it is our job to protect 
against those entities that violate the law. We are devoting a 
lot of energy, using authorities Congress has given us to 
supervise some of them. When it comes to offshore, that is a 
very challenging problem, especially using digital technology.
    Mrs. Houchin. The gentleman's time has expired.
    The gentleman from New York, Mr. Garbarino, is now 
recognized for 5 minutes.
    Mr. Garbarino. Thank you, Madam Chairwoman.
    And thanks, Director, for being here.
    I just want to get some clarification. I know you talked a 
little bit already about the small business data collection 
rule. I have heard from the private sector that the CFPB's 
small business lending data collection rule would impose 81 
overly-burdensome and complex requirements, and 81 new data 
fields for each loan by some counts. I think you said 15 to 20 
is possible before.
    Mr. Chopra. Yes. I think there is a little bit of apples 
and oranges between data points. I believe there are about 20 
data points. The fields is a little bit of a different issue. 
It is kind of how they input it.
    Mr. Garbarino. So, could 81 be correct, 81 data fields?
    Mr. Chopra. Yes. It is in the way in which it is sent, but 
it is not the points that is in the statute.
    Mr. Garbarino. So, about 81 new data fields for each new 
loan, along with a timeframe of 18 months for some companies, 
and 36 months for others. I have heard from the industry that 
18 months to set up a collection data, protect it, and get 
everything ready with its lenders is going to be too short of a 
time period. And I don't see why it is 18 months when other 
companies are getting 36 months. Are you concerned that the 18 
months could set some of these lenders up for failure? And why 
not just do everybody for 36 months?
    Mr. Chopra. I think we wanted to look at how smaller banks, 
local banks, others--they have different issues that they have 
to deal with when implementing some of this. So, we focus the 
18 months on the largest lenders, which have very large books 
of this and which are often big institutions themselves. That 
is part of the reason we had this phased-in implementation.
    Mr. Garbarino. I understand the reasoning for doing it for 
the smaller banks, or for the smaller lenders, but I am hearing 
from the bigger lenders that 18 months is still not enough time 
to get this done.
    Is the CFPB considering delaying the 18-month timeframe?
    Mr. Chopra. Not at this point. We are working to make sure 
that the system is well prepared for it.
    I will say that many of these are quite large entities and 
have told us they have put in a lot of preparation. But I am 
happy to hear more from those about any challenges. We have set 
up a group that is working with them on implementation.
    Mr. Garbarino. Okay.
    Mr. Chopra. And, again, the reason we phase it in--there 
will be learnings from the first phase that will help us make 
sure that, when the much larger group reports, it has less 
kinks.
    Mr. Garbarino. I understand. And I know you have also 
talked--bless you, by the way--about the data breach. What is 
the CFPB doing to protect against future data breaches?
    Mr. Chopra. Insider threats are something that we are going 
to be putting a lot of effort in. We are also putting 
technological solutions in place. This was a very serious 
incident. We want to make sure not just that our systems are 
safeguarded from being penetrated by outsiders, but that even 
insiders have limited access and are not having to transfer 
things outside of the systems that are most secure.
    We are working with the established guidance on making sure 
that we mitigate and take steps. There are a lot of changes 
that were already in progress. But certainly, it is a serious--
--
    Mr. Garbarino. How many employees do you have who are 
focused specifically on cybersecurity?
    Mr. Chopra. It is pretty substantial. I don't have the 
exact number. But within our technology and innovation group, 
not only do we have a chief privacy officer, we have 
information security professionals. We also get outside 
support. Outside auditors work with our Inspector General as 
well.
    Mr. Garbarino. Okay. And one last question. This was a 
major cyber incident. When a major cyber incident occurs in a 
Federal agency, they are required to notify the Cybersecurity 
and Infrastructure Security Agency (CISA). Do you know if and 
when CFPB notified CISA about this breach?
    Mr. Chopra. We certainly notified--and I believe we 
notified DHS and CISA. I would have to look at the timeline, 
but----
    Mr. Garbarino. But you did notify them?
    Mr. Chopra. We notified everyone in the OMB guidance, and I 
believe they are listed explicitly.
    Mr. Garbarino. Okay. Director Chopra, unfortunately, the 
CFPB has disbanded the Office of Innovation and offers very few 
collaborative avenues for innovative companies to work with the 
CFPB to gain regulatory clarity on the myriad of announcements 
coming from the Bureau.
    A huge issue in my district is home affordability. The 
average cost to originate a residential mortgage has doubled 
from $5,000 to over $10,000 in the last 10 years. What exactly 
is the Bureau doing to try to lower the cost of homeownership?
    Mr. Chopra. There is so much we are doing. We have actually 
put out and gotten information about how we can streamline----
    Mrs. Kim. [presiding]. The gentleman's time has expired.
    Now, I would like to recognize the gentlewoman from 
Colorado, Ms. Pettersen, for 5 minutes.
    Ms. Pettersen. Thank you, Madam Chairwoman.
    And thank you, Director, for being with us today. This is a 
difficult committee, and you have done a great job. I want to 
thank you for the work that you do every day advocating on 
behalf of our constituents and making sure that some of the 
most-vulnerable people are not being taken advantage of and 
that they have a voice and a backstop.
    I really enjoyed meeting with you in my office to talk 
about the specific services that you are able to provide. And I 
think many people don't even know that some of these tools 
exist. They don't know what is available.
    So, I want to just give you some time to kind of highlight 
the programs and the opportunities that constituents have just 
to--what we should tell our constituents to make sure that they 
know the services that you provide.
    Mr. Chopra. Yes. I think the focus of where we can provide 
so much individual help is our consumer complaint line. It was 
established in the law. We are doing, as it was said, 10,000 a 
week. And we hope that, even if you don't know the name of any 
individual agency, that you know there is a place you can go if 
you are having trouble with a consumer financial product or 
service, you can file a complaint, and it won't go into a black 
hole. It will actually--and in most cases, I believe--transfer 
to the institution.
    And it is such a way that we have been able to get people 
help, but also for the financial institutions to know the 
challenges that are being experienced so that they can make 
tweaks to their processes and mitigate harm going down. I urge 
you all to get the word out about our complaint line.
    Ms. Pettersen. We plan on doing that with some of our 
constituent outreach. Thank you for highlighting that.
    One of the concerns that we have heard come up is with 
limiting the junk fees. And I want to thank you for taking this 
on. While I recognize you don't have the authority to highlight 
these practices, you were able to set a limit.
    And this is something that all of us have experienced, 
where we think that we are going to buy something, and then on 
the back end, we see all of these additional fees of which we 
are unaware. This especially hurts people who are lower income, 
and our elderly. So, thank you for taking this on.
    One of the concerns that has been raised, though, is that 
when we are limiting fees like this, that there won't be the 
financial options for people with lower incomes where--the 
unbanked areas, I guess you could say.
    What can you address in this area on what you are doing to 
make sure that is not the case?
    Mr. Chopra. We have seen a lot of good movement and 
competition to offer lower, no-fee products with no surprises 
to really anybody. Sometimes, we don't necessarily need to jump 
through a bunch of hoops.
    It really is one of the benefits of competition here, and 
we see so many institutions offering these products now. I 
believe thousands--maybe it is hundreds of banks--these no-fee 
accounts. And it is a big benefit to those who live paycheck to 
paycheck.
    Ms. Pettersen. That is great. That is another thing that we 
can highlight for our constituents.
    I know that there were a lot of questions asked of you with 
limited time to respond. I want to know if you have any other 
pieces that you would like to address on some of the concerns 
that have been raised and the questions that my colleagues have 
asked.
    Mr. Chopra. I think there was a question I didn't get to 
fully answer about the Financial Stability Oversight Council. I 
think there were elements of the guidance from 2019 that were 
not related to the law at all. It indicated that there were 
certain procedural hurdles that I think were not appropriate. 
But, of course, we have to carefully consider what Congress 
wanted, and obviously, we do not want there being big nonbank 
institutions who cause a collective calamity for the rest of 
the market.
    I also will say again, there has been a lot of talk about 
our motives. Our motives are to carry out and fulfill the 
objectives you have specified in the law, and I take great 
pride in the work of all of the public servants at the CFPB who 
have helped so many people.
    Ms. Pettersen. Thank you for recognizing that. I also want 
to thank your team for doing their work. I know that it is a 
difficult job. It couldn't be more obvious with the hearing 
today. So, thank you for what you are doing every day.
    And with that, I will yield back.
    Mrs. Kim. Thank you. The gentlelady yields back, and I now 
recognize myself for 5 minutes.
    Director Chopra, I am disappointed that your written 
testimony did not mention financial literacy or education as 
one of your priorities. Consumer education is one of six 
primary functions of the Bureau. It is essential for consumer 
protection.
    I serve as the Co-Chair of the Financial Literacy and 
Wealth Creation Caucus, so I would like to urge you to make use 
of the public-private partnerships to enhance financial 
literacy.
    According to the Civil Penalty Fund annual report published 
in November 2022, the total unallocated balance was more than 
$481 million, and recent reinforcement actions may have 
increased the fund's unallocated balance to exceed $2 billion.
    Why haven't you used the fund for its intended purpose, to 
enhance financial literacy, since you took office as Director 
of the CFPB?
    Mr. Chopra. Let me just say that financial education and 
literacy is a real cornerstone of what we are doing. In the 
annual report that is part of our testimony, we----
    Mrs. Kim. Well, I am glad we agree.
    Mr. Chopra. The Civil Penalty Fund has two purposes: victim 
redress; and financial education, financial literacy programs. 
We actually expend resources on financial literacy through our 
general funds which cannot be used for victim redress.
    Mrs. Kim. Sure.
    Mr. Chopra. But we also want to make sure that those funds 
expended are smart, and that they are not wasteful, that they 
are effective.
    Mrs. Kim. I am glad to hear that, and I also want to echo 
the urgency of my colleague across the aisle, Mr. Scott, to use 
the fund for its intended purposes.
    And can I ask that you, rather than focusing on blog posts 
and press releases, I would remind you that you have other 
tools in your toolbox, like that fund, to prevent fraud and 
scams. So, please, let's use more of them.
    Now, are you concerned about the amount of credit card debt 
held by Americans?
    Mr. Chopra. I don't tend to think about the overall amount, 
but it certainly has accelerated. I worry more about 
delinquency costs, and having a competitive cost of credit.
    Mrs. Kim. I would like to address that issue. In the credit 
card fee proposal, you cite the research that was co-authored 
by two former Bureau economists who use the Bureau's own card 
data. That study states that when the credit card late fee 
decreases, it incentives higher usage and greater likelihood of 
paying late. Is that right?
    Mr. Chopra. I don't know the specific study you are 
referring to, but if you are saying that a late fee may have 
some impact----
    Mrs. Kim. That is a study that is based on peer-reviewed 
academic publication. Are you aware of that?
    Mr. Chopra. Okay. And I apologize, I don't have all the 
facts from that individual study cited, but of course we think 
a lot----
    Mrs. Kim. Right. Despite that, the Bureau--disregarded that 
research and instead you conducted your own analysis, but that 
analysis wasn't peer-reviewed or published in a journal. That 
is our understanding.
    Mr. Chopra. We certainly look at a lot of data sources 
studies on consumer credit. I know you are mentioning one. I am 
happy to take questions for the record on that specific one, 
but the overall goal----
    Mrs. Kim. Your credit card fee proposal is not going to 
reduce prices for consumers. Instead, the reduction in fees 
will lead to an increase in borrowing costs and potentially 
higher debt for families and individuals.
    The CFPB also acknowledged in the credit card fee proposal 
that customers who never pay late, which is about 74 percent of 
all Americans with credit cards, will not benefit from the 
reduced fees and could face higher maintenance fees, lower 
rewards, or higher interest-paying accounts. I just wanted to 
point that out to you, and then, I want to move on to the next 
matter.
    I agree with you that open banking has the potential of 
unleashing innovation and more options for consumers. But the 
CFPB recently issued a Request for Information soliciting 
public feedback about the data broker market. The request uses 
a definition of, ``data broker'' that essentially covers every 
consumer-facing business in existence--firms that collect, 
aggregate, sell, resell, license, or otherwise share consumers' 
personal information with other parties.
    Do you believe that small businesses in Southern California 
like hair salons, gyms, and flower shops should be subject to 
the Fair Credit Reporting Act since they collect personal 
information from consumers?
    Mr. Chopra. No, I think the purpose is about companies that 
are assembling dossiers just like other background screening 
companies or as other tech companies and others. So, we are 
actually soliciting input. That was not a proposed rule. We are 
trying to make sure we get the right type of input.
    Mrs. Kim. Sorry, my time has expired.
    Before I ask the next person to ask questions, I would like 
to enter into the record the Washington Post Fact Checker that 
was dated June 12, 2023.
    Without objection, it is so ordered.
    And I now recognize the gentleman from Missouri, Mr. 
Cleaver, for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman. And thank you for 
being here, Mr. Director, and I personally appreciate your 
availability to all of us.
    In my real life, I am a United Methodist Pastor, and I deal 
with people mainly when they are in trouble. Rarely does 
someone come by and say, I just wanted to come by and tell you 
that the world is great and everything is really, really nice 
in my life.
    One of the things that people have as a major problem, more 
than anything else, are their finances. And there are those who 
have sought to take advantage of people. In fact, they are 
generally targeted by the so-called credit repair companies, 
organizations which are so fraudulent that they make Bernie 
Madoff seem like the Dalai Lama.
    And they specialize in making people who are hurting, hurt 
more. They are inverted ATM machines. And we are being 
victimized--when I say, ``we,'' I mean that Americans are being 
victimized by other Americans who are running these fraudulent 
organizations, promising to fix bad credit, when in reality, 
they are going to fix you for coming in there.
    So, I am thinking right now that something more needs to be 
done. I am not sure exactly what we can do to stop the 
financially-distressed consumers from being hurt worse, but 
many of those consumers, as I mentioned earlier, are targeted, 
and they are trying to get their financial lives on track.
    What is the Bureau doing? Are you getting a large number of 
complaints about these credit repair companies which are, from 
my perspective, almost committing thievery?
    Mr. Chopra. I don't have the exact numbers, but certainly 
people who are trying to repair their credit, many of them have 
been targeted by those who are fraudsters or scammers.
    There have been a number of enforcement actions. I 
definitely welcome any input on how we can more holistically 
deal with this, because sometimes going after one by one well 
after they have run off with the money won't fix the problem.
    I think accuracy in credit reports, and figuring out how 
people can rebuild is obviously important, but we want there to 
be honesty and compliance with the law.
    Mr. Cleaver. Yes, I don't think it is something that you or 
your agency can repair alone. But there needs to be something 
that we can do with the CFPB and local organizations, maybe 
Ministers, because they hear these ads on the radio. They are 
not on TV much anymore, they are advertising on the radio, and 
I am hoping that we can maybe work together on something.
    I don't want the Bureau sued, but I am just wondering, can 
we do Public Service Announcements, talking about the mortgage 
thievery that is going on, and of course, these credit repair 
organizations, can the agency get involved in trying to get 
public----
    Mr. Chopra. Yes. Actually, even the financial industry has 
helped with warning about some of these things. We try our best 
to help people understand and give them objective information, 
what should you do when you have a potential issue like this. 
It can be hard to get out the word sometimes because people can 
be micro-targeted very specifically. But there is certainly 
more we need to do to make sure people are protected from this.
    Mr. Cleaver. Thank you. I may have some ideas that I will 
share with you later. Thank you very much.
    I yield back, Madam Chairwoman.
    Mrs. Houchin. [presiding]. The gentleman yields back. We 
will now take a 5-minute recess to allow the witness a brief 
break. The committee stands in recess.
    [brief recess.]
    Mrs. Houchin. The committee will come to order. The Chair 
now recognizes the gentleman from Florida, Mr. Donalds, for 5 
minutes.
    Mr. Donalds. Thank you, Madam Chairwoman.
    Director Chopra, thanks for coming in. You have said 
previously that markets work best when rules are simple, easy 
to understand, and easy to enforce. Would you agree that 
markets work best when rules are actually relevant to today's 
marketplace?
    Mr. Chopra. Yes.
    Mr. Donalds. I want to go into a couple of things about 
payment portions of the CFPB's small dollar--I know that this 
is at the center of litigation and that none of us know for 
sure where it will end up.
    Section 1022 of Dodd-Frank requires the CFPB to conduct a 
5-year assessment of each significant rule or order adopted by 
the Bureau under Federal consumer law. This assessment is 
supposed to address the effectiveness of the rule in meeting 
the purposes of the objectives of the Bureau under Dodd-Frank, 
as well as specific goals stated by the Bureau.
    The public would also be allowed to comment on the 
recommendations for modifying, expanding, or eliminating a 
rule.
    If this rule had gone into effect and had not been delayed 
by all the legal challenges, I believe the Bureau would have 
had to complete such assessments of this rule, this year.
    When you look at the data, the alternative credit 
marketplace has shifted dramatically over the past 5 years. So 
if the court were ultimately to decide with the Bureau on the 
legality in question, wouldn't it be prudent to evaluate 
whether the rule is relevant in today's marketplace and is 
really going to meet the objectives that the Bureau intended?
    Mr. Chopra. Yes. One of the things I have done is, I have 
really opened up and increased the analytical rigor of justice. 
So many times they create rules, and it is not future-proofed. 
I am always open to collecting more information to see if there 
are any adjustments that need to be made.
    I don't know the specific provisions you are referring to 
that may have been subjected to technological change. There are 
certainly many rules that were transferred to the CFPB from the 
Fed and the FTC that were not future-proofed and were way too 
complex. And certainly, simplicity is a lodestar. We can't 
always get there, but we want to get there.
    Mr. Donalds. Would you acknowledge that it is prudent for 
the CFPB to periodically review all of its existing rulemakings 
and decide whether they are even necessary in today's 
environment?
    Obviously we know that banking is moving by leaps and 
bounds, becoming far more technical for a myriad of reasons, 
regulation being one of them. Wouldn't it be prudent forCFPB to 
actually review these things periodically, make adjustments, or 
cancel previous rules altogether?
    Mr. Chopra. That is some of what you are seeing me doing 
during my tenure. We are reviewing some older ones, and putting 
them out for public comment. Even the one on credit cards is 
really a rule review at its core, to make sure it is based in 
realty.
    I think you are raising this point, though, on digital, 
that is really important, and we need to make sure that we are 
not just thinking about the human world, but how will it work 
in the metaverse, how will it work in other contexts, because 
otherwise it creates problems if people don't----
    Mr. Donalds. I am glad you raised it for two reasons, one 
with the revision--the re-look at the credit card rule. You 
have talked about--and I think comments from my colleague from 
California brought it up in earlier questioning--the changing 
of late fees from $30 to $8. You are on the record saying that, 
``By our estimate, 75 percent of late fees, $9 billion, have no 
purpose beyond padding the credit card companies' profits.'' Do 
you stand by that statement?
    Mr. Chopra. Yes. That is based on our estimate, and that is 
based on a point in time where late fees might have been lower 
than they otherwise would have been.
    Congress was clear: Those penalties are supposed to be 
reasonable and proportional, and we do not want loopholes from 
rules being used to evade the law.
    Mr. Donalds. Director Chopra, do you think that it is 
prudent that the CFPB has the abilities to unilaterally decide 
what are going to be late fees on consumer financial products, 
notwithstanding the ability of cost shifting as a result of 
capping fees?
    Mr. Chopra. We don't have unilateral ability. Congress sets 
out the framework in law----
    Mr. Donalds. Director Chopra, I would argue that the CFPB 
is making broad use of their powers, which, by the way, to be 
clear, I do believe wholeheartedly that your agency is 
unconstitutional. I think it was unconstitutional when it was 
created in Dodd-Frank. I think you were given broad latitudes 
under, frankly, partisan government at the time, to not even 
really be accountable to the people's branch of government, the 
legislative body, and so I do have issues with CFPB.
    But let's be clear, you all have taken broad latitude on 
many issues over time----
    Mr. Chopra. And it is always consistent with the laws that 
Congress passes.
    Mr. Donalds. And I would argue that those laws have always 
been----
    Mrs. Houchin. The gentleman's time has expired.
    Mr. Donalds. ----subject to Congress' ability to oversee 
you.
    I yield back.
    Mrs. Houchin. The gentleman's time has expired.
    The gentleman from New York, Mr. Lawler, is now recognized 
for 5 minutes.
    Mr. Lawler. Thank you, Madam Chairwoman, and Director 
Chopra, thanks for being here.
    A huge issue in this hearing has been the egregious lack of 
accountability of the CFPB and the lack of clarity and poor 
process that has been followed in your rulemaking and 
enforcement processes.
    What is your understanding of the Administrative Procedure 
Act (APA)?
    Mr. Chopra. The Administrative Procedure Act has a lot of 
different provisions. It touches on everything from citizens' 
ability to petition their government, to rulemaking--I think it 
is about rulemaking.
    Mr. Lawler. Yes, let's not waste time. What is your 
understanding of the Administrative Procedure Act with respect 
to your job duties and how you do rulemakings?
    Mr. Chopra. Absolutely. It requires that the decisions not 
be arbitrary and capricious. For rulemakings, legislative 
rulemakings, it requires a notice-and-comment period. It 
requires a response in consideration of those comments, a 
proposed rule, and a final rule, and all of those rules are 
subject to court review under that standard.
    Mr. Lawler. And how should that rulemaking process be 
followed? How should the notice-and-comment period operate?
    Mr. Chopra. Based on the other relevant statutes that 
apply, there is a period for which you publish the notice in 
the Federal Register. There is a comment period of 30 or 60 
days, or what have you. After that time, comments need to be 
considered.
    In any final rule, we analyze the comments, and actually, 
substantial parts of the final rule discuss those and explain 
where there were changes made from the proposal to the final 
rule.
    There are other parts of the APA as well, but, again, we 
are subject to quite a bit of review on that.
    Mr. Lawler. And where in the APA does it talk about being 
able to rule-make through blog posts and speeches?
    Mr. Chopra. It doesn't, and the concept of rulemaking 
through blog posts, I don't know where that term came from, but 
when we issue a blog post, we get feedback from various 
industry associations. They want more information about what 
the CFPB is doing, to have more notice to understand specifics 
about programs----
    Mr. Lawler. Right. But you seemingly are using these blog 
posts to issue more information, thereby issuing more rules, 
correct?
    Mr. Chopra. No, those aren't rules. Rules have to go 
through, as you are suggesting, the Administrative Procedure 
Act.
    Mr. Lawler. Right. So why are you using blog posts and/or 
giving speeches talking about what the industry should be doing 
if you are not following the exact rulemaking process?
    Mr. Chopra. Blog posts are something that we put on our 
website as information for consumers and the public. Those are 
not rules. Statutes and regulations, codified in the Code of 
Federal Regulations, are what creates obligations.
    Again, we received input from entities like the Consumer 
Bankers Association who asked us to continue what my 
predecessor, appointed by President Trump, had done on issuing 
advisory opinions, and informal guidance. And that is what we 
have continued to do.
    I am getting two different, conflicting messages about, we 
are trying to transparent and open. Those blog posts for the 
consumers and the public are not rules and not creating new 
obligations.
    Mr. Lawler. Okay. So that we are all clear, your blog posts 
do not have the weight of law, and nobody should follow them? 
Is that what you are saying?
    Mr. Chopra. No one has suggested, I think, that blog posts 
are rules. So, again, we have tried to provide guidance, other 
advisory opinions, very consistent with my predecessor, and 
also what almost every other agency does. There has been a 
request for more of it over the years, so that you don't need 
lawyers as much, and you have more plain-language support. This 
seems like something that is a good government----
    Mr. Lawler. Okay. So going forward, we all agree you will 
be using the Administrative Procedure Act for rulemaking? You 
won't be using blog posts or speeches to put any obligations on 
anybody within the industry going forward?
    Mr. Chopra. There has been no blog post that created a new 
obligation on the industry.
    Mr. Lawler. Good. Okay. Great. We are in agreement.
    Do you agree that you will commit to publicly releasing all 
of the facts and data that are used to support your decisions 
during the rulemaking and enforcement process? There have been 
numerous requests by this committee----
    Mrs. Houchin. The gentleman's time has expired.
    Mr. Lawler. Thank you.
    Mrs. Houchin. The gentleman from Nebraska, Mr. Flood, is 
now recognized for 5 minutes.
    Mr. Flood. Thank you, Madam Chairwoman. Director Chopra, 
thanks for your testimony today.
    I want to talk about student loan repayment. In March, 
Nelnet, the largest Federal student loan servicer, submitted 
SEC filings disclosing a significant modification to its 
Federal contract with the Office of Federal Student Aid, or 
FSA, showing that the Biden Administration has slashed its 
funding for student loan servicing operations as 40-plus 
million borrowers return to repayment on September 1st.
    Nelnet disclosed these layoffs due to the rate cut. Across-
the-board, Federal student loan servicers are entering return-
to-payment significantly understaffed. That is a concern. The 
contract modification also shows FSA's acknowledgement that it 
is paying less for student loan servicing as borrowers return 
to repayment.
    At this time, I would like to submit both of Nelnet's 8-K 
filings related to the contract modification for the hearing 
record. They are dated March 22, 2023, and March 27, 2023.
    Mrs. Houchin. Without objection, it is so ordered.
    Mr. Flood. Director Chopra, can you commit to me here today 
that your agency will not enforce against Federal student loan 
servicers for providing service levels commensurate to their 
compensation as articulated in their current contracts?
    Mr. Chopra. They are only responsible with respect to the 
CFPB for Federal consumer financial protection laws. They have 
to adhere to those laws based on--and if they enter into 
contracts with third parties, with governments--I do take 
your----
    Mr. Flood. With all due respect, Mr. Chopra, they are 
entering into a contract with the Biden Administration's FSA 
office. I think I maybe interrupted at a point where you were 
going to acknowledge----
    Mr. Chopra. Yes, I was just going to say that there is no 
question that the resources of the Office of Federal Student 
Aid to hire contractors--I understand that it is a very dire 
situation, and that if they can't adequately get the right 
support, the return to repayment will not be successful.
    But I just want to be transparent and open with you. We 
can't consider--there are contract negotiations when it comes 
to compliance with the law. They are a private party which is 
free to enter into contracts as they deem appropriate, but I 
hear your point.
    Mr. Flood. I am really sounding an alarm here as 40 million 
borrowers come back into repayment. This is a bad situation if 
the FSA does not provide the resources and this Congress does 
not provide the resources to make that happen.
    And would you agree with me, it is going to be the most 
difficult for those re-entering repayment, who need an extra 
level of support and service to ensure that they don't have an 
adverse effect on their credit report, so that they understand 
how to make those payments? Do you share that concern?
    Mr. Chopra. I agree with you, we need to make sure that--
and in some ways, if there is not adequate support, the 
problems we could incur could be very, very big.
    Mr. Flood. You and I agree.
    The decisions by this Administration to politicize the 
student loan program through extended unnecessary pauses in 
pursuit of illegal loan forgiveness has harmed borrowers, and 
has resulted in a confluence of events that all but guarantees 
repayment to be exceedingly difficult. And no one but this 
Administration is to blame when and if return to repayment is a 
disaster.
    I have more than 3,000 student loan servicer employees in 
my district. When the FSA decides to cut rates, they are 
jeopardizing jobs in my district, but as we have discussed 
here, they are cutting down on the service that are provided to 
people who are going to work, who got an education, and who 
have to pay back these loans.
    And I don't want them to miss the opportunity to figure out 
how to get that money back to the creditor and make sure they 
don't suffer any ill effects on their credit reports, and that 
we get them back on the road to repayment in a good way.
    Mr. Chopra. And an appropriate level of service is probably 
good for everybody. It increases the likelihood of longer 
repayment--or appropriate repayment, and as you mentioned, 
avoids the consequences of default that can be very significant 
for an individual and the system.
    Mr. Flood. Absolutely. And it would be a disaster if the 
Federal Government refuses to pay adequate rates to servicers 
on the one hand, and then starts going after them for service 
quality on the other. And I think that is the point that I 
really want to make.
    And with that, I yield back.
    Mrs. Houchin. The gentleman yields back.
    The gentleman from Iowa, Mr. Nunn, is now recognized for 5 
minutes.
    Mr. Nunn. Thank you, Madam Chairwoman, and Madam Ranking 
Member. And thank you, Director Chopra, for being with us 
today.
    We are almost to the end of the testimony. I know this has 
been a marathon, and I appreciate you being forthright with us 
and having this conversation.
    I am going to ask you some questions that are coming from 
my small businesses, and a lot of my local bankers. These are 
folks from the Midwest and Iowa who are trying to do the best 
they can. They have been very successful in the past, but there 
have been some challenges coming from an agency which, in their 
words, they feel is opaque, potentially increasingly partisan, 
and analytically weak.
    Several of these same colleagues today, on both sides, have 
brought up the funding structure, and its lack of oversight in 
terms of not having an executive board or an independent 
Inspector General, that they find concerning.
    I am going to leave it to the Supreme Court and its highly-
qualified judges to determine the future on that front, but I 
would like to talk about some of the tactical issues that are 
facing your organization right now.
    I want to start by following up on what Representative Pete 
Sessions highlighted here on the issue of a cybersecurity 
incident that occurred under your watch. Your agency had a 
major breach of personal information just a few months ago.
    I want to share, as a guy who has worked national 
counterintelligence, as a Director of Cybersecurity, that these 
issues have a huge impact on those people who are directly 
impacted.
    I would like to begin by asking, when did the CFPB first 
find out about a data breach?
    Mr. Chopra. The exact timeline, I don't want to get any of 
the dates wrong, but when we identified a potential email that 
was sent to a personal email account that included confidential 
information, we brought together our response team to 
investigate it.
    Mr. Nunn. Approximately when was that?
    Mr. Chopra. I want to say that that was--I don't want to 
get the dates wrong, but late February.
    Mr. Nunn. So, in February. When were you able to inform 
Congress about that?
    Mr. Chopra. I don't have the exact date, but we----
    Mr. Nunn. Approximately?
    Mr. Chopra. I don't want to even give an approximation. I 
want to say it was about a month or maybe a little less.
    Mr. Nunn. So, the individual who was----
    Mr. Chopra. But that was from the time of the suspicious 
email.
    Mr. Nunn. Right.
    Mr. Chopra. So obviously, we had to look to see if there 
was any other----
    Mr. Nunn. Absolutely. Data forensics was required. I fully 
agree with you on that. As an independent organization, though, 
I want to make sure that Congress is getting alerted to these 
things happening.
    Specifically, how many individuals were targeted?
    Mr. Chopra. Targeted?
    Mr. Nunn. Yes. In the data breach.
    Mr. Chopra. Do you mean how many individuals' information 
was----
    Mr. Nunn. No. First, I want to know how many people were 
targeted. Was this solely focused on one individual, or was 
there a mass approach----
    Mr. Chopra. Oh, I see. The issue with the unauthorized 
transfer was with one employee, who is now a former employee.
    Mr. Nunn. Copy. So, one point of entry of which we are 
aware.
    How many individuals had their information hemorrhaged as a 
result of this breach?
    Mr. Chopra. What we did was, we looked at the unauthorized 
transfer of emails, and we looked at the specific documents or 
information that went to their personal emails----
    Mr. Nunn. Director, was it over 100,000?
    Mr. Chopra. Yes. It was approximately 250,000.
    Mr. Nunn. Okay, so a quarter of a million. How many 
consumers and institutions were impacted by this?
    Mr. Chopra. I don't have the exact number of institutions.
    Mr. Nunn. Do you know how many Social Security Numbers were 
compromised?
    Mr. Chopra. It could be zero, but the 250,000----
    Mr. Nunn. Or it could be all of them?
    Mr. Chopra. Oh, no, no, no, the 250,000 did not include any 
Social Security Numbers, or things that might create identity 
theft.
    Mr. Nunn. Dates of birth?
    Mr. Chopra. I don't believe so, but I can check.
    Mr. Nunn. So, no personally identifiable information (PII)?
    Mr. Chopra. Their name was there, and that is PII, and that 
is why we take it so seriously.
    Mr. Nunn. Right.
    Mr. Chopra. And so----
    Mr. Nunn. I was a victim of PII this past January when my 
personal information was hemorrhaged just with the release of 
my name.
    When were these Americans informed that their information 
had been leaked?
    Mr. Chopra. We started notifications, I believe, around 
last month, but, again, we don't have----
    Mr. Nunn. Copy. So we are at a 5-month period here, and 
here is where I think this is so important. We are asking the 
American public to have faith in an institution that is now 
asking my local banks and my lenders to provide up to 21, or 
even more, up to 81, according to them, data points of 
information that you are keeping in a Federal server that has 
been breached. It took a month to notify Congress, and then we 
are going on 5 months now before the individual even knows that 
they are compromised.
    I have a real concern here with not only the data 
management piece of it, but that your organization, by not 
having an independent Inspector General, is now compromised for 
any type of review on this.
    If Congress doesn't have the ability to control your 
budget, if the Federal Reserve is the one in charge of 
monitoring you, and then there is no Inspector General, 
wouldn't you agree that an independent Inspector General has 
made these other organizations stronger as a result of having 
an independent source?
    Mr. Chopra. Because the Fed has so much sensitive 
information, our IG has a strong capability on cybersecurity 
and----
    Mrs. Houchin. The gentleman's time has expired.
    Director Chopra, you can answer the remainder of the 
question in writing for the record.
    Mr. Chopra. Okay.
    Mr. Nunn. Thank you, Madam Chairwoman.
    Mrs. Houchin. The gentleman from Nevada, Mr. Horsford, is 
now recognized for 5 minutes.
    Mr. Horsford. I want to thank the chairman and the ranking 
member for holding this hearing, and thank you, Director 
Chopra, for coming to discuss consumer protection efforts that 
your Bureau has undertaken.
    I am amazed every time that I am reminded that your agency 
is the only Federal agency focused solely on protecting 
consumers from unfair or deceptive practices in our financial 
marketplaces, the only one in all of the Federal Government.
    The imbalance of information between sophisticated 
financial scammers and individual consumers has provided ample 
opportunity for predatory behavior in our financial sector.
    My constituents certainly remember a short time ago before 
we had the CFPB, and they remember how financial institutions 
were able to saddle them with destructive and, in many cases, 
discriminatory loans that caused untold damage to them and to 
our economy.
    Under your leadership, I have been pleased to see that the 
CFPB is standing up for consumers, combating the negative 
effects of medical debt, breaking down barriers to credit, and 
holding the credit reporting companies accountable.
    I have also been interested in your actions to combat 
discrimination in entrepreneurial lending and to allow every 
American a fair shot at starting a small business.
    Here in America, in my opinion, especially in Nevada, the 
enterprising spirit of small business formation is alive and 
well. We have been given the opportunity to succeed. Our 
constituents are industrious and hardworking, with the 
determination necessary to create their own store or service. 
And yet, so many of my constituents, everyday Nevadans, who 
have the dream of being their own boss, have continued to be 
discriminated against simply because of the color of their skin 
or their gender.
    Owning their own business is a crucial way for individuals 
to build wealth and thus a key part of the conversation on how 
to close the racial wealth gap. Unfortunately, for so many of 
our minority and women-owned entrepreneurs, discrimination in 
small business lending has cut that dream short.
    That is why in March, I applauded your finalized rule to 
increase transparency in small business lending as an effective 
way to promote both equity and economic development.
    Director, would you please highlight the benefits for our 
nation's women-owned and minority-owned businesses now that 
this final rule is finalized?
    And additionally, as you look back over previously-
administered programs such as the Paycheck Protection Program, 
would you consider the data collected under this rule helpful 
to ensure an equitable implementation of those programs in the 
future?
    Mr. Chopra. Just like homeownership, small business 
ownership has been such a vehicle for families and communities 
to build wealth. We do not want to distort it by discrimination 
or other bad practices, which we have seen in our country 
routinely for many years.
    You raised the Paycheck Protection Program, and so many 
minority- and women-owned businesses were not able to access 
those critical funds, and the data will help programs to be 
designed better so that we can make sure these programs are 
working as they are intended.
    Mr. Horsford. And the CFPB also is tasked with enforcing 
financial protections such as provisions of the Military 
Lending Act, which provides indispensable protections for the 
thousands of active duty servicemembers who live and serve 
within my district.
    Nevadans in uniform deserve to devote their entire energy 
to defending our country and should not have to worry that they 
are being taken advantage of by malicious actors. Whether it is 
preventing illegal high-interest loans, standing up to 
aggressive debt collectors, or ensuring adherence to legal 
protections, the CFPB is standing up for our servicemembers 
when and where it counts.
    Within your report and in various blog posts, the CFPB 
mentions that servicemembers are more likely to report certain 
types of consumer harm. Could you detail what those were likely 
to be and whether they filed complaints on those matters, and 
how has the CFPB been able to take that up?
    Mr. Chopra. Credit reporting is very big. Like for the rest 
of the population, it's one of the top areas of concern. And as 
I mentioned before, an inaccurate credit report or being 
hounded for debt that you don't actually owe, for a 
servicemember or a military family is particularly pernicious, 
and we are doing what we can.
    We have brought multiple Military Lending Act enforcement 
action----
    Mrs. Houchin. The gentleman's time has expired.
    Mr. Horsford. Thank you, Director.
    Mrs. Houchin. I will now recognize myself for 5 minutes.
    Thank you, Director Chopra, for your testimony and your 
time today in this lengthy hearing.
    As my colleagues have expressed, many of us have heard from 
our constituents about concerns regarding the Bureau, its 
regulatory overreach, and its lack of transparency. From 
regulation by enforcement, to undue burdens for small 
businesses, it is clear the CFPB, as it is currently operating, 
is not serving consumers or small business owners.
    Director Chopra, the CFPB is unique among Federal agencies. 
Not only is the Bureau not subject to the appropriations 
process, it also does not have an executive board to weigh in 
on decision-making and does not have an Inspector General to 
root out waste, fraud, and abuse. Effectively, you oversee the 
Bureau without any meaningful or direct oversight. As a result, 
there is a remarkable lack of transparency with the CFPB, which 
is something I and many of my colleagues would like to see 
fixed.
    Director Chopra, in May of 2022, you unilaterally issued an 
interpretive rule, without statutory authority, expanding the 
authority of States to pursue and enforce violations of Federal 
consumer protection laws under the Consumer Financial 
Protection Act (CFPA).
    The CFPB further promoted this additional enforcement 
activity by assuring States they may bring an enforcement 
action to stop or remediate harm that is not addressed by a 
CFPB enforcement action against the same entity.
    And the CFPB announced it would enter into more than 20 
agreements with State Attorneys General. While Congress 
intended for the CFPB to enforce Federal consumer financial 
laws and protect consumers in the marketplace, it did not 
intend for the CFPB to intimidate companies by conspiring with 
State agencies to pursue duplicative and sometimes competing 
and confusing enforcement actions.
    The Dodd-Frank Act limits attorneys general in bringing 
Federal enforcement actions, and while State attorneys general 
may enforce the CFPA in cases where the CFPB has not, the law 
does not allow for a State attorney general to become a party 
to an existing CFPB enforcement action. It is, therefore, 
inappropriate for the CFPB to recruit a State Attorney General, 
who is not otherwise investigating a company, to pursue 
enforcement as a means of intimidation.
    Moreover, the effect of your May 19, 2022, interpretive 
rule is different from solely enforcing the law. It is more 
akin to deputizing State attorneys general to enforce the CFPA 
on behalf of the CFPB, something Congress did not authorize.
    How many actions has the CFPB initiated with State AGs 
since the issuance of your interpretive rule?
    Mr. Chopra. I don't have an exact number, but I don't think 
it deviates from prior practice across multiple Directors.
    Mrs. Houchin. Reclaiming my time, would you check to see 
and confirm in writing how many actions the CFPB has initiated?
    Mr. Chopra. Yes.
    Mrs. Houchin. Okay. Of these actions----
    Mr. Chopra. When you say, ``initiated,'' do you mean, 
initiated an enforcement action?
    Mrs. Houchin. Since the issuance of your interpretive rule 
with State AGs.
    Mr. Chopra. Okay.
    Mrs. Houchin. Of these actions, can you explain to me why 
you involved the State AG as opposed to prosecuting the action 
solely under your own authority?
    Mr. Chopra. We saw in the lead-up to the financial crisis 
how preemption deleting State law had very negative effects on 
protecting inside State borders.
    It is very common. The DOJ, the FTC, and others regularly 
partner with State AGs and State agencies. Our statute requires 
us to coordinate. We have memorandums of understanding (MOUs) 
with States and others.
    Mrs. Houchin. Okay.
    Mr. Chopra. I think we are trying to do exactly what the 
law is saying.
    Mrs. Houchin. Reclaiming my time, first of all, I just want 
to reiterate that Congress did not authorize the outside use of 
attorneys general in this instance.
    Does the CFPB----
    Mr. Chopra. Congress explicitly authorized----
    Mrs. Houchin. Excuse me. Does the CFPB engage in forum 
analysis when determining whether to institute an action in its 
own capacity or to engage a State AG?
    Mr. Chopra. We look at enforcement actions based on the 
company's place of business, and whether we have any co-
plaintiffs. We do exactly, I think, what every other law 
enforcement agency does.
    Mrs. Houchin. The result of this interpretive rule, in some 
instances, has resulted in competing enforcement actions 
between the State's actions and the CFPB's actions.
    The Administrative Procedure Act provides interested 
parties with notice and an opportunity to be heard and the 
right to seek judicial review of agency action. Why did you 
choose to issue an interpretive rule regarding actions by State 
AGs as opposed to engaging in a notice-and-comment rulemaking?
    Mr. Chopra. It restated what the law already authorized, so 
this was not creating any new obligations on the public.
    Mrs. Houchin. Okay.
    Mr. Chopra. But we were trying to be very clear that the 
CFPB does not have a monopoly on consumer protection----
    Mrs. Houchin. Director Chopra, I have one last question for 
you.
    Mr. Chopra. Sure.
    Mrs. Houchin. By using the mechanism of an interpretive 
rule, haven't you avoided the requirements and the procedural 
protections of the Administrative Procedure Act?
    Mr. Chopra. No.
    Mrs. Houchin. I strongly disagree. I do want to say that 
members of this committee, including myself, will continue to 
provide oversight to the Bureau and ensure that we make the 
Bureau responsive to the American people.
    My time has expired.
    The gentleman from Tennessee, Mr. Ogles, is now recognized 
for 5 minutes.
    Mr. Ogles. Madam Chairwoman, thank you. Mr. Chopra, we are 
in the home stretch.
    The data breach has been mentioned, and we have seen 
breaches across the industry, in both the private and the 
public sector. So obviously, I think we all have concerns 
there.
    The CFPB's small business lending final rule states that 
covered financial institutions are required to collect and 
report to the CFPB data on applications for credit for small 
businesses, including those that are owned by women or 
minorities.
    As it pertains to the data on women and minorities, what is 
the purpose of collecting that data?
    Mr. Chopra. That is in the statute. The statute requires 
the collection for minority-owned businesses, and women-owned 
businesses.
    I believe the statute has a number of objectives, including 
things related to community development, fair lending, and 
more, but that was not something that the CFPB decided. We were 
under court order to implement that.
    Mr. Ogles. Okay. Now, when it comes to that--and 
understanding that some of this was perhaps pushed on the 
agency, correct--do you think part of the intent is to prohibit 
or track discrimination but also fraud and abuse?
    Mr. Chopra. I think the primary purpose is like the Home 
Mortgage Disclosure Act, which collects similar data for 
mortgages, and it is used, again, for community development, 
and data analysis, but also to detect and deter potential 
discrimination.
    Mr. Ogles. Part of that is identification, and I will 
borrow from Senator Blackburn. As we are collecting this data, 
definitions are important. So, from the agency's perspective, 
what is a woman?
    Mr. Chopra. The way in which the rule is specified is that 
a borrower--we even published a sample forum--can self-identify 
as to--there will be options for race and ethnicity. It is 
really up to them. They don't have to provide that information.
    Mr. Ogles. Sure.
    Mr. Chopra. There is a specific statutory right to refusal.
    Mr. Ogles. You explained the process, but if data 
collection is important, and it is a data point that is going 
to be used and verified, whether it is in statute or not in 
statute, what, from the agency's perspective, what is a woman, 
and how do you define it?
    Mr. Chopra. We don't get into those questions.
    Mr. Ogles. Then, why would you need that data?
    Mr. Chopra. The agency was sued for not implementing----
    Mr. Ogles. Have you come back to this committee, to 
Congress, and said, Hey, we need some relief here, because this 
data point, this data that we perhaps shouldn't house, nor is 
it relevant to our core mission, have you made that request?
    Mr. Chopra. Fair lending is a part of our mission. The 
Equal Credit Opportunity Act----
    Mr. Ogles. But the data point that you have yet to define 
doesn't seem to be germane to----
    Mr. Chopra. The way it is defined is that a borrower gets 
to self-select. We receive comments in the--the proposal was 
proposed before I was in office.
    Mr. Ogles. I understand that, but you are explaining the 
process of someone checking boxes. Again, you are collecting 
data. It would seem----
    Mr. Chopra. We are actually reporting it.
    Mr. Ogles. ----that that data is not relevant to your core 
mission.
    Mr. Chopra. I don't agree.
    Mr. Ogles. I understand fair lending is part of your core 
mission, but if you can't even define the definition of a 
woman, it is a data point that you can't use in any analysis 
that you might otherwise make.
    And so, you should be coming back and saying, we need 
relief from this, this, this in particular.
    Mr. Chopra. To be honest, that data is important for fair 
lending, and we try to put together and implement the statutory 
directives as faithfully as we could. I do think having 
knowledge on women-owned businesses which did have challenges--
--
    Mr. Ogles. Women-owned businesses is an important data 
point, just as you just said. So, what is a woman again, 
please?
    Mr. Chopra. I don't really know what you are suggesting 
here, but the idea is that people are able----
    Mr. Ogles. The idea is that----
    Mr. Chopra. ----to self-identify what----
    Mr. Ogles. I will reclaim my time. In subcommittee, and 
when we were talking about the CFPB, it was one of those 
moments. And this is nothing personal against you, you were not 
the person who put this in place, so please don't take this 
personally.
    Is the core mission of your agency, as has previously been 
done by other agencies, and if there was an agency that should 
be disbanded, I will paraphrase Hamlet, ``To be or not to be, 
yours should die a painful death, '' because I do believe it is 
irrelevant. I do believe you have gone outside your core 
mission and you have abused the authority that otherwise 
Congress should take back from you.
    And I would argue in agreement with Mr. Donalds that you, 
your agency--not you, sir, but your agency is unconstitutional.
    With that, Madam Chairwoman, I yield back.
    Mr. Chopra. There was a financial crisis----
    Mrs. Houchin. The gentleman's time has expired. The 
gentleman yields back.
    The Chair now recognizes Ms. Garcia.
    Ms. Garcia. Madam Chairwoman, I have a unanimous consent 
request. I would like to submit two documents from the Consumer 
Bankers Association, which clearly requests the CFPB to not 
only issue rules but also issue guidance to help industry 
comply with the law.
    This seems to contradict what many of my colleagues on the 
other side of the aisle are claiming, that the CFPB should not 
be issuing guidance. In fact, the document reads, the case for 
regulation through rulemaking----
    Mrs. Houchin. Without objection, it is so ordered.
    Ms. Garcia. Thank you.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place his responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
    I ask you, Director Chopra, to please respond no later than 
July 14, 2023.
    This hearing is adjourned.
    [Whereupon, at 1:57 p.m., the hearing was adjourned.]

                            A P P E N D I X



                             June 14, 2023





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