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tv   Richard Cordray Testimony on CFPB Semiannual Report  CSPAN  April 12, 2016 6:30am-8:47am EDT

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what may or may not have been the action of someone else you're assuming that your
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conclusion of disparate impact is valid, it would seem to me that this would be a poster child for will making as opposed to an enforcement action. there is a big difference. the lenders did nothing to intentionally discriminate against anyone. and yet it would appear you treated them as such because he did not have the authority to go after your real target. your own press release is entitled, cfpb to hold auto lenders accountable by illegal discriminatory mark up. that's your press release. i interested you make these decisions on a case-by-case basis, but here today in this committee tell us in detail why you chose to go after these lenders as if they were knowingly discriminating against certain individuals as opposed to pursuing a rulemaking that would give the lenders some clarity and some certainty in the area.
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>> i was a couple of things. i put them somewhat differently than how you stated it. first of all, auto lenders set up their lending programs. they can linda directly or indirectly. they sent those programs. the results of their responsibility. if there's a systematic pattern, practice in their programs of people being given higher rates based on race or ethnic origin, that is against the law. we enforce the equal credit opportunity act at, in the same way and with overlapping jurisdiction of the justice department. the justice department only has enforcement authority. all of these matters have been taken jointly with th the justie department and they've led to findings of disparate impact discrimination. as to whether this is the law, my job is to enforce the law, whether someone -- >> your jobs also to follow the
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law. excuse me. your job is also to follow the law. >> absolutely. the u.s. supreme court reaffirmed it is the law of olympic we will enforce it vigorously and we blew to root out discrimination which nobody supports in any of these marke markets. >> there's been a lot of talk here before the committee in a discussion a couple of days ago about your agency using enforcement as a tool rather than rulemaking. that some people believe what you all are after money rather than justice. what do you say to that? >> if you're a forcing the law, there are people who will not like a big because it would rather cut corners save money. if people are violating the law they should be made to reimburse consumers or harm.
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that's the basic premise. i know you were a prosecutor early in your group or country took seriously their obligation to make people follow the law. it's what which we doing good if it hasn't been done previously and people are used to not being done, that's not the way things should be. >> everybody should have respect for the law, that includes you enter agencies, correct? >> absolutely. >> thank you, mr. chairman. director cordray, we heard a lot two days ago about the arbitration study. i like to give a chance to talk about the studies, its methodology and its findings. what did you find? what does the bureau plan to do to allow consumers to seek justice in court? >> it's important to understand the authority. congress spoke in the dodd-frank act and they spoke loudly on this issue of arbitration agreements and consumer finance contracts. what congress said, this is the law of the land, is those arbitration agreements were
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harmful inmost mortgage contracts and would be banned flat-out inmost residential mortgage contracts. they also said congress said in the statute as to the rest of consumer finance, we are going to task this new agency, our agency, with the job of studying this problem carefully and reporting to congress about it. based on resul results of that , to consider whether policy interventions are awarded consistent with the study, take a broad latitude, consistent with the public interest to protect consumers. our first job, and a good job, was to conduct a study of arbitration clauses in consumer finance contracts. we undertook that seriously. it took us a couple of years to do that study. we assembled and brought in data that no one had a chance to look at before about arbitration matters, about court cases,
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about every manner in which different dispute may be result in the consumer finance arena. those who have criticized the study acknowledged that it was the single most comprehensive, really ground breaking study that had ever been done. and continue to of ever been done in the history of arbitration agreements, which go back to the 1920s. the study found that in consumer finance issues in particular, but often what you have is a small amount of harm to individual consumers on a broad basis. maybe millions are harmed to the tune of 50 or $100. that is enormously profitable for financial institutions but it is not worth the individual consumers while to pursue either an arbitration or a court case. what we found is arbitration agreements in these contracts tends to cut off people's
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remedies pretty much altogether in particular because it bans their ability to group together and bring group claims so financial institutions who harm on a broad basis cannot be held accountable. that's essentially what our study found. there is a lot of detail in the and it isn't is a subject or 30 or 60-second discussion because runs through hundreds of pages. it continues to be discussed and debated and we continue to discuss and debate it and consider all of the input. we offer to speak to the authors of one critical study, one of them was won to speak to us, the other was not. we will take input from all sides. we are moving forward. we have indicated we are contemplating a proposed rulemaking to build on the results of that study and to address this issue and expect that to be in the proposal stage at some point this spring. >> our panel tuesday claim
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regulations are reducing access to products like free checking and, therefore, they say pushing consumers into payday loans. americans have a record $3.5 trillion in consumer debt, wanone thing does more than just six years ago. talk about the availability of credit and the research that the bureau has done. >> i had a chance to review the transcript and her comments about free checking that a thing for dubious. i saw some of it was being pinned on the turbine and at such a right to be skeptical of that claim which has been established as a cause or effect. -- durbin amendment. access to credit is expanding. by the way there's also a lot of looseness around dates in some of the testimony. some the test we talk of things that have happened since 2008, crediting restricted. credit was restricted in which the financial crisis because households lost $12 trillion in household wealth. mortgages became tiger credit
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card became tight. what's been happening since the dodd-frank act was passed in 2010 and the car deck and also the consumer bureau which didn't open until july 20 levitt is we see credit begin to expand again. in the mortgage market and in the credit card market, the federal reserve studies have shown that credit is expanding advanced in the credit card market in particular there is broadly increasing consumer satisfaction with these products. we think that's a good thing. we are not pro-consumer protection at the cfpb. we are pro-consumer. if consumers have access to credit, that's a good thing. we do see that expanding across markets. >> last year the bureau announced it was considered proposing rules that we talked about this in the past, that would cover payday lending, vehicle title loan, other high loads. ohio is attempting to block payday lending to its law has
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been ineffective. talk about how these companies have started state laws, the afford to the role, and you've also commented there are a dozen states that don't allow payday lending. haven't they done with moldova credit in those states without access to payday lenders? >> there's been no research to show that come into range is dependent on people's definitions of 12 to possibly 18 states that restrict payday lenders because they have usury caps in place. there's a research to indicate consumer welfare is harmed in those states. the our studies indicating both credit scores may be higher and bankruptcies may be lower. that's a question. i think as the circumvention, the best example is one this committee can understand readily because you have been involved in the military lending act. it was passed in 2006 with the
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promise congress made to cut off some of the predatory credit those being offered to active duty servicemembers. the rules that were implement by the federal agencies at that time were pathetic. the consumer bureau was part of the discussions now about creating new rules and we now have strong rules in place that take effect in october that will bring the meaning of the military lending act to fruition for servicemembers and their families across the country. the protections will be realized now i believe. if loopholes are a loud and gift rules are flimsy, then the industry will circumvent those rules and, in fact, they have shown the ability to do so.
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>> thank you, mr. chairman. director cordray, azurite privacy concerns about the cfpb's big data collection efforts and the ability to reverse engineering this information. .com i requested an official review of the cfpb is data collection by the government accountability office. the report acknowledged the cfpb's ongoing collection of outgoing 600 million credit cards, 11 million credit reports, 700,000 auto sales, 2.7 million consumers, cosigners and borrowers, 29 million active mortgages and 5.5 million private student loans. i don't want to get into it now but i would like you to verify that data. i want to know if the data i just put out is accurate whether the numbers are higher or lower. >> we were glad to have you commission the gao study. they issued a report, made recommendations to us. they have indicated that we have
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successfully implemented those recommendations and they will be moving to close those out. i think the result has been it improve our processes and agency. as we discussed, the last thing i want is for our agency can assemble data and be criticized. you have been apprehensive on this issue with legitimate reason from the beginning but we've handled visited responsibly and carefully. we are looking come in response to some for dialogue and oversight we've had from you and members of this committee, looking to do sampling of data where ever possible. we are including at how we can do that with -- >> i appreciate your efforts. i want to verify with your the data i just put out. argue only get 600 million credit cards? are you looking more or less or what have you?
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i don't want to -- >> the rail is that's in a state of flux and we're looking to find ways i believe we could report successor to you over time that we will be doing a sampling of that data. >> as of october 31, 2015, the cfpb has issued a mandatory data collection requests under its section 1022 market market of 40. six of those requests were sent to fewer than nine companies. the significance of which is that effectively of which the review of the request on the office of management and budget. and circumvent the opportunity for public comment on the information request. the feedback i received on the positive advanced product was that it was a voluminous and saw a number of data fields including the use of the positive advanced product, overdraft protection and not sufficient fund fees.
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while it did include a caveat that the financial institution should not produce personally identifiable information, the truck identifies the consumer or the account, i understand the data collection requests effectively required these institutions to scan customer accounts line by line for their financial behavior going back years. it would seem this is a large-scale data collection and individual consumers use of financial products on a transaction by transaction basis. can you confirm how many data fields were collected through this request and how many customer accounts were scanned to get this data? >> there were different requests with different data fields but what it wants this is the story you tell which i agree with actually vindicates and shows careful concern by us to comply with the paperwork reduction act and congresses purpose and that act. the fact we would limit ourselves to small number of institutions in order to get david do sampling of a kind.
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we're doing that in part because of airport reduction act provides incentive to do sampling rather than going out to 400 institution. we may go tonight. if they're going to try to go to foreign institutions if it becomes essential to our interview burdens and we've done that at times and gone through the omb process. >> if you look at credit cards, my understand is, this is a rough number, there somewhere over 1 trillion credit cards in, credit card accounts in the united states. if you're looking at 600 million, that's half at least to understand you may be far above the $600 million level which is what i asked for the number. >> the credit card database is different from the 1022. it's an compliant and elites who sampling which is a good thing. on the credit card, we are working to get a sampling process for that i believe we will be able to do that over time and continued to report and
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that's response to your oversight and your concern, which i share. >> my question specifically was how many data fields were collected and how many customer accounts were scanned to get the data? >> happy to follow up i can depend on which 1022 you're talking about our which database you're talking about and will be glad to be briefing your staff and make sure you're satisfied. >> thank you very much, mr. chairman, and thank you, mr. cordray, for your great work. i worked very hard with my colleagues and me to ensure that the office of affairs was included in the general financial protection bureau. i must say under your leadership and the leadership of paul the petraeus it's doing a remarkable job. -- holly. the return over five and dollars to servicemen, women and their families. one reason it was so critical
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was when i was a younger person i was in a paratrooper company and most of my time was consumed in utah for creditors coming after my troops based on very suspicious credit arrangements. i appreciate what you're doing and i don't think there's anyone in this congress that would object to protecting the financial of being of the men and women are wearing the uniform of the united states. i would go further say i don't think they should be different for the brothers and sisters who may not be wearing the uniform are being exploited other peop people. >> amen to that. >> one of the things you're inquires have uncovered is a practice that seems to be, if not growing, very disturbing. that is, creditors contacting commanders and threatening the security clearance of an individual member of the armed forces base on a debt. this has huge ramifications,
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prevent promotions. in some cases because of the job they might be separated. can you comment on that and what you are doing? >> it is against the law for a debt collector to threaten anyone, let alone a service member, with consequences that that debt collector has no ability to carry out. it's common for debt collectors, those who push the envelope, those who don't care about complaints, to threaten arrest or imprisonment which they have no ability to effectuate. in the service member context, the ominous activity that many debt collectors engage in is to threaten to go to the commanding officer of the service member of threaten the security clearance which would threaten their ability to remain on active duty in the military and perhaps a this honorable discharge.
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that is an actual practice. it is against the law. we've taken strong enforcement action against a. and people talk about regulations on enforcement, when we take enforcement action against a debt collector for doing that, threatening to secure clips of a service member, i hope people take that as regulation by forsman's him and every other debt collector understands they are at risk, violated the law and will come down hard on them if we become aware of the fact they continue to do that. everybody should be on notice in this marketplace. no one should be doing that. >> i appreciate that because i saw it from the perspective of executive officer in an infantry company were i was getting barraged. that was my job. i did not suffer the committee. letters every day of young men who have been really called into buying vehicles i could never afford extra in interest rates and then being hounded and
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beaten up, finally going to the command and threatening their status and imagery would be impaired. what you're doing is critical. as ranking member on the armed service committee is critical to our readiness and the build of our trips to can't get other jobs so thank you. through your work we've made improvements in the military lending act. we had an act that would cap interest rates for active personal at 36% but people went in and found that because of loopholes with the previous regulation that, in fact, some lenders were charging 400% for title insurance. 584% for
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>> the bureau noted that since enactment consumers have saved more than $9 billion in over limit fees, $7 billion in late fees, and the total cost of credit has dropped almost two percentage points, and all the while the availability of credit card credit has increased. that in my mind is just one example of why consumer financial protection laws and regulations create a fair marketplace. in that regard, as i think you know i have been engaged in the question of prepaid cards, which has exploded over the last figurefewyears especially among
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households who lack access to traditional banking services. i've introduced legislation that would require clear disclosure of these different the most abusive kind of charges. it would also require prepaid cards to fdic insurance like a traditional bank account and couple protections to a bank account if the card is lost or stolen. minicar providers have already voluntarily provided such measures and standards which shows it can be done but it also highlights the need for strong consistent protections across the full market. could you give us an update on the status of the bureau's work on prepaid cards, and particularly since i see the rule did not include a proposal did not include the issue of fdic? how we create this type of protection necessary in that regard? >> we've had some discussions about this previously. we been very attentive to the legislation he introduced into
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the pot and turn recirculated thinking about those issues which with attempted to incorporate into our own approach to these issues. that will making this painting. it was up her nose and. with adjusted those comments that we expect to finalize. we will finalize the that rule sometime this spring. on the issue of fdic insurance, particularly is whe one of the issues under submission. i don't want to overstep proper bounds but a discussion with the fdic about it and we understand the concern. many of these cards not effectively serve as substitute bank accounts of people who are unbanked. they can be effective have consumer protections. right now we have no consumer protections. this will provide consumer protection for the first time very similar to those bank accounts. the other thing that's new since the last talk in committee is we
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did have the rush card fiasco. the consumer bureau was very engaged in addressing, this is people at prepaid money on their cars and then thousands found they couldn't get them a off the cards because the operational glitch by the company. some sort of problem we continue to sort through from the standpoint of an investigation in making sure consumers are made whole. that's outrageous. people prepay money in order to use it when they need it and if they can use when they need it then they been cheated of their service. that shows all the more to meet the need for strong protections in this area. >> area. >> i appreciate that. senator brown and by virtue about the kind of glad to see the bureau is personally. zombie foreclosures, unfortunately my state of new jersey has the highest rates of zombie foreclosures which is basically a bank that against foreclosure action within
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because of the low value of the house chooses to abandon the foreclosure without providing any notice to the homeowner. can you talk to me about what steps the bureau has taken always looking to take to address this issue? at least can home owners receive notice when the bank has decided not to pursue it? and lastly the national council of the raza reported 40% of councils report mortgage services, services rarely or ever provided written communications in the preferred language of a bar with with limited english proficiency. i know the bureau has identified the provision of language services as an issue in his borders of the examination procedures but particularly for homeowners, it seems to me that moore is a to ensure they receive the type of comprehensive loss mitigation
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assistance that's nested. can you address those speak with i'll take the second one first in terms of preferred language. there was a helpful provision in the statute that congress pass on remittances that said it are basically selling a product in your preferred language, then pick up to follow up in all respects to the product in that language. that's probably a good principle across the border but it would specify a were able to implement it. in terms of preferred language, the software working with fhfa and others and we recognize the issues that in the importance and the vital elements of that for communities are affected. it's not only spanish-speaking but also wide right of way which is integral part of the country. we have come to understand in terms of zombie foreclosures it's a difficult issue. it is often an issue or investor
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properties but, and sometimes the our properties taken over by thanks get what you're talking about the starting a foreclosure, then stopping the foreclosure at some point. the consumer doesn't assume you have any notice to you don't realize they will still be on the legally since the property was never foreclosed on and sold for taxes and insurance and other payments. they may well have left the home in the meantime because if you are being foreclosed, you think you are being foreclosed on, often you start examining your options and you take one when you can find it. it a difficult problem. you are right that notice is a basic. it often would not be effective for consumers and highly effective because the award left the home and it is worse frankly in thin the state with a lot of foreclosure processes because there's no chance of a bank starting and stopping maybe 200, 300, 400, 500 days in which put
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the consumer may have left the home. we understand there's consumer harm. to our complex is around but it's something we're looking to see we can do maybe what others can do as well on how we can work together on that, including with state court. >> thank you, mr. chairman. thank you for being here this morning. you made a speech to the credit union and talked about how the mortgage market was good news for all around the more opportunity for more consumers and a wider path to the american dream and the mortgage market made stronger by the changes we have made. but the evidence for first time homeownehome owner over the lase years is about first time home owners have been in decline and that disproportionate impacts minority would be homeowners. the fact of the matter is about 74-75%, majority of the vibration own homes about 45% of african-americans own homes.
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about 55% of hispanics own homes. we look at the rules and dodd-frank been put in place how to reconcile the mortgage market specifically is good news for all around me in fact for first-time homebuyers who are disproportionate minority the news isn't as good. what we've seen throughout the country specific at home in south carolina is the market is far more expensive and the growth, an explosion of apartments is nearing an all-time high in the last decade or so. >> and i know you raised the issue of tuesday. i had a chance to review the transcript and it's important and very interesting issue. a lot of pieces to. i would say in terms of first time home buyers i think if you look at the statistics on the market -- niche market, owner occupied real estate first-time homebuyers are still thinking about the same share that they
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have. the difference that's affecting the market is that there's many more investor owned and investor purchase properties than there had been before the crisis. it appears investors have seen their opportunity as prices plummeted and they have bought up a lot of properties. this will be a problem in the number of communities because although it helped find a bottom in certain markets and maybe trade equilibrium, it has bolted the door off the market and made unavailable to you and me ever going to go try to buy a house tomorrow. the our inventory problems in local markets around the country. sometimes many houses are tied up in the foreclosure process, depending on the state. sometimes houses remained underwater dependent on local valuations so it's difficult for some to sell at their underwater. and homebuilders have been reluctant to come back in with a rush to the market and build new inventory although that's starting to happen. i don't want to give you a view
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of a happy talker. what you see in the mortgage market is fisher of the mortgage market that is taken right now by credit union a community banks together has risen since dodd-frank come has risen since the rules took effect and is at levels that is the highest event they've been in 20 years. that's a good thing. those institutions dictate the best lending right through the crisis everyone else with security. a state firm, had low default rates and we have tailored our rules to give them advantages and recognize their model in the mortgage market. i think that's a good thing. >> it appears to me the consolidation within the banking space has led to more access for smaller credit unions to continue to grow, and in section 1022 of dodd-frank it states plainly the bureau may exempt any class or covered person,
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service provider or consumer financial or services from any provision of this title, or from any rule issued under this title. do you think if the credit in union's or community banks working desperately impacted, by the rules of the agency, ma this section will allow there to be more taping of regulations? do you see that as a possibility you going to take hold of? >> we have been doing that since the beginning, and we tailored our mortgage was ever taken which, of course, is the most significant finance market for all players at around $10 trillion. we tailored our rules in notable ways for smaller providers and we continue to do that. just implemented cockatoos helpful definition of world which was very brought for smaller institutions. -- congress is helpful definition. we don't regard congress as
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having said to us you a broad exemption afforded you can do whatever you want despite what congress said. that would be too much. where we of evidence we think we can build on will making such as the mortgage risk nation rules, the mortgage servicing rules, the remittance rules, we will tailored for smaller institutions because that's the right answer. they are responsible come close to the customers, provide goods and services. the notion we would simply -- congress set its own limits here in terms of we have authority over banks over 10 billion but not under come in terms of supervising them and the like. congress didn't accept credit unions from all laws and regulations and their front of you i can just come in as a matter of opinion or ideology and vulnerable but. where i can see mortgage rules and the mortgage market they have done well and they should come we should try to tailor our rules accordingly, we have done that and will continue to do that and be glad to take your input on how you think we should
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be doing that. we get the input directly from icba, from others, all the time. >> happy to have a conversation with you off-line. my main concern as a wrapup, mr. chairman, is when you look at the number of households that are unbanked or underbanked and we talked last tuesday about, the fact of the matter is with better information provided by staff, the number is around 4 million under and unbanked households because the regulatory burden impacts the institution, the higher th the cost, highe either costs and loe access. as far as the onion and then unintended consequent is come for performing households are either unbanked or underbanked then was at the beginning of dodd-frank. >> actually i would be interested in the exactly what
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the numbers and the dates are because since the crisis that number has gone up because the price of blue economy for people. where they can depend on dodd-frank, and we didn't even open our doors until july 2011, that's what i would get off the train on some of the commentary i've seen. >> one of the things, the numbers -- >> that's three years before. >> that's what -- >> by the way i know we would agree that the credit unions reached an all-time high in membership nationally last year is a good thing. i am very supportive of that. i'm sure you are. it's notable that it boggles a supposedly killing the credit unions, how is thei the memberst an all-time high? >> the number of members of the credit unions are higher, the number of credit unions themselves are lower. >> that's a decline that has been steady. >> there's a consequence that comes with regulations that may be contributing to that fact is
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the. >> may become although that's been a consistent friend for 30 years. the evidence i've seen is a static suffered since dodd-frank although the was a study that think in my view, discredited that seems to suggest that. i don't think it bears out when you do the analysis. >> happy to continue the debate. >> senator warner. thanks for your patience. >> director cordray, great to see again but i also want to commend you for your service. i would point out that if you look behind you see a lot of folks who were supporters of the bureau. many of them you see from the commonwealth of virginia raw invite virginia organizing. it's a shorter commute for them. although something need to be done about the traffic in the region. i wish i knew someone was still governor. i want to pick up on what senator corker was. i think it would be, actually
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bipartisan sense that some of the more egregious actions on payday lenders needs to be stopped and people are taking advantage of calm and we look forward to guidance and will making. an area as we discussed before, i spent some time looking into is the ninth. as if they've got more of him banking will be put frankly on, with supercommittee power you have on your phone. i've looked at a number of firms who are looking at tools around incomes moving, run different, differential ways of paying folks, many low and moderate income people because of managing their finance on the record basis, pull off a cliff at the end of the pay period ended up having to resort to a payday lender or others that will put them in that death spiral. the challenge is when you have
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these new technology tools, how do you balance the innovation but at the same time as we sink into these that didn't do a good job of protecting customer information, what stand i'm going to hold them to and not hold back institutions but it will be the same disruption from fintec we've seen perhaps with airbnb or uber. good but also possibility for abuse. >> that's true. the nature of innovation is its neutral but hopeful and encouraging. some innovations have been very bad the exotic mortgages that were developed in the lead up to the crisis were innovative, no doubt about that. there were also terrible for consumers as it turned out. will look at fintec and i'm interested in these issues because i know you were and we have a team that we have project catalyst that is very engaged with the financial innovation
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community, not just in silicon valley but across the country and also innovations that are in large institutions that are researching how to improve their products. we believed would be not appropriate for new fintec startups to be kidding an advantage because they are arbitraging the right of choice system come not complying, not taking seriously or as a socially what the banks and regulated institutions have to do. out enforcement action against the wall of was rather modest action to get sick if you are telling your prospective customers and consumers that you're going to have to get a skewed in a certain way and gives them confidence and then they want to deal with you, and disinfect your not can you deceive your customers and give you an unfair advantage. that should stop. that should be second to the whole market that at a minimum deliver on your promises to your customers. i do think it will be
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interesting to see how this develops. there's a lot of promise in fintec. they could lower cost. it may be that the banking system in the fintec companies will converge in some ways so that there's better compliance but also we get the benefit of the innovation. we will see but we're trying to stamp out other because if we fall behind it this could affect markets over time and we could end up thinking we are doing with a market that is difficult to one that -- >> i think it would be somewhat of a distinction some of these tools, and even level some of that income volatility. i guess i would point out i hope catalyst is working with regulators about the rest of the world this is a worldwide
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phenomenon. spirit i think our team has been leading regulators around the world. a group in britain is modeled after -- >> of want to stay close to my timeline i want to get in my last question. somebody raised a year or so ago here in good response, i would like to raise it again. a different level of credit protections between debit cards and credit cards. debit cards with younger persons. i didn't realize until we got into the data breach issues, and we've got legislation to try to equalize those credit productions. i had to go back and try to change out my daughter's cards from debit cards to credit cards because -- >> these are always the best stores would talk of some specific issue we do with our own life and we found to be more complicated than we had hoped. this is what we're doing with prepaid cards as well. we are trying to bring them from a standard of no protection to comparable to debit cards are not exactly credit cards. you reach in your wallet and
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pull out a card can you may not distinguish between what kind of card it is. you should be protected in all three areas. is there some special protection for credit cards, those are sometimes applicable. they may be applicable to prepaid cards come something we have under consideration. again i'm not sure all the supervision should apply to all cards but also be subject to protection. certain provision should apply to all cards and that's something we can continue to discuss. i appreciate your interest in it because it's a hard issue but an important one. >> senator cotton. >> thank you. mr. cordray, which discuss the cfpb's actions on indirect auto lending specifically the allied case. in this matter since auto lenders are not permitted by law to collect -- collect race competed have actual race of claimants available, correct? >> we didn't have it through
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allied's own records, correct. >> administering the settlement funds, he used a two-tiered approach to notify the potential victims of discrimination based upon a statistical determinations appreciating the customers lasting bad actors, correct? >> this is consistent with how we dress is handled in these cases in every instance we don't have the granular mortgage data, which is true only for the mortgage market. >> so yes. as i understand it's about a 95% chance of being nonwhite by the bureau's model, he or she would receive a mail t from them of eligibility for forthcoming receipt of a remuneration check unless the return an opt out notice? >> and discuss with the cartoon were eligible to making the claim that should satisfy those criteria, yes. >> a second threshold of 50-95% likely to be nonwhite and that required them to return to form
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opting in? >> that's correct. i think you're actually stating all the pieces so far, yes. >> neither group were individuals required to identify the ethnicity to which they belonged? >> so there's always a question how much specificity do want him to provide. everything that makes all transactions more complex, there's a drop of rate of people who don't bother. >> said she raised beckham were they required to make any statement or affirmation under penalty of perjury that they did not belong to the protected class speakers they were required to make an opt in which was a statement they belong to the protected class spirit that they have to make it under penalty of perjury? >> i don't believe that was the case but i can clarify with my staff. >> i discovered a handy program on "the wall street journal"
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that similar to the method you used to evaluate the race of buyers of cars in pursuit of this enforcement action. you plug in the name and zip code and out pops a statistical likelihood of race. the website and the journa jours account got come in at the exact method you do and, of course, the address is more reliable than the zip code. the hearing on tuesday said brown revealed his zip code in ohio. shockingly the programs is that senator brown has an 89% likelihood of being black based on that same zip code. senator shelby turns out has a 76% probability of being black. tom cotton has an 88% probability of being black. so using this example, senator brown financed his vehicle through allied. he felt that a racially threshold you just confirmed it had no legitimate business reason existed to discover the apr and was offered.
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with the cfpb have sent in a remuneration check? >> let's take the specific examples and take effect what we're talking about the in each of those three examples they would have to affirmatively opt in to receive a check. they would have to -- who have to respond and state that there were a minority borrower. i assume that each of you would not do that, otherwise you're committing fraud. let's go back. what we have is whether discrimination or against allied financial. 325,000 or so consumers were effected. they were charged higher rates based on the pattern of practice that systematically showed that minorities in certain categories paid higher rates. the question -- >> i'm not disputing any of the underlying facts. i'm talking about the redress of potential -- >> but what you do for the 325,000 -- difficult for them to
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comply or to set up a system that is reasonable for them to comply get the money? if there some systematic large number of people who fraudulently cut checks under the settlement, that's something we'd take close the countup and consider responding to. at 325,000 people did qualify for appropriate redress, and i haven't seen the large number of fraud cases. it's just all this hypothetical, people have an apprehension, people think -- >> hypothetical actor model that says senator brown has a doing% chance of being black. >> but there's no -- >> senator brown would have to opt in? >> and you would've had to opt in and senator shelby would've had to opt in. >> utility which it committed fraud simply because it didn't see it to do it under because it didn't say you didn't underpin a perjured? >> did the department of justice recommend require affirmation
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speak with we worked with the justice department -- >> i didn't ask that their i asked if they recommended it. the obama department justice require, did speed i wouldn't speak in interim deliberations. >> we don't have to speak to them. >> we are acting together. we are on the same page. but again i don't think -- >> did you personally decline the department of justice recommendation that a penalty of perjury attached -- >> iaaf i did. i would have become my staff all up wit with you but i don't wano care goes into discussions but don't leap i did. i have no recollection of having done that. i do think that -- let me just say, i stand by and believe this is a reasonable approach to how to get relief to hundreds of thousands of consumers who were discriminated against under the disparate impact theory to understand people disagree with but the supreme court reaffirmed it is the law of the land. >> 330 members of the house back
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disagrees. -- house of representatives disagrees. >> thank you very much, mr. chair bair and thank you, mr. cordray, for testimony. i wanted to make sure i have the numbers right. it seems like every time you have come your i am underestimating the amount of money you have returned to consumers, either in the form of direct restitution because of predatory practices or principal reduction or cancel the debts. i believe that number is not over $11 billion? >> every time i connect my age gets a little older but now i believe it's over $11.2 billion. >> that's a pretty phenomenal thing that support for fairness in financial transactions have returned so much to hard-working american families who are victims of predatory financial
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practices. i was reading an estimate of the savings, and these are the savings that occur because of practices were discontinued on credit cards, investment of about $16 billion in saved fees, and believe that is independent from the 11 billion, correct? >> yes. and that was the card out of the kept $16 billion in consumer's pockets over a period of time but there's another point that either senator warned that many times has very powerful, which is when we talk about looking backward, $11 billion was made of able to consumers in which to our $16 billion over a backward looking for to type it is also the case those changes, as lasting changes, meaning every month, every year going forward people are saying the same amount of money which overtime results in eventually hundreds of billions of dollars for consumers. that's meaningful. it's hard to add up but it's
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very meaningful. >> which leads into the question us would ask you, in terms of the mortgage reforms that are being undertaken, we have an estimate of what is this a because people can't fairer deal mortgages rather than predatory mortgages? >> i don't begin to know how to count that but i'll ask our researchers who are smarter about how they might be able to go about doing that. clearly the mortgage market when you compare mortgage markets, about $10 trillion. credit cards are under 1 trillion. student loans are a little over 1 trillion auto loans are somewhat, around 1 trillion. if there are savings of our roles, and i'm sure that our, but it our, but it may be hard to document them, they will be at a much higher skill for people. >> it's a wonderful thing to have so much good done for hard-working american families by having their practices in the
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financial markets. sometimes it seems to get lost in the conversation in this committee so i want to emphasize that point. >> briefly one of the thing. people often talk about the bureau, you, meaning he personally. we have about 1500 people who do this work and to achieve these results that people can be very proud of. and benefit everyone of your constituents. they benefit constituents in every one of your states. i'm very proud of him and when you say nice things about the bureau, you are talking to them, not so much me.
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>> some of whom had them for a while and then stopped in particular in response -- >> let me just make the point that right now across the country citizens are so frustrated by this system that is rigged against them from citizens united on to the actions of the house and the senate, their current leadership. but this is a real example, an arbitration clause in a contract where, essentially, the judge asserting your rights when there's a predatory action goes before someone who is hired by the person on the other side of the issue and only keeps getting hired if they find in favor of the folks that are hiring them. that is a system that's rigged.
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so i applaud your work on arbitration. i have a few seconds. let me turn to payday loans n. state after state after state, the states have gone to work to say these are unfair practices. and, by the way, just yesterday in our chairman's state 28-1 the state weighed in, the state legislators weighed in and said we absolutely want to curtail the abuses of the payday loan industry. and often the payday loan industry says this reduces access to credit, and they cite a reduced number of loans being made after these state actions. but what that doesn't take into account is a family that gets a fair loan, gets one loan instead of getting ten in the course of a year and so forth. i found in oregon after we cracked down on payday lending and put an interest rate cap on it, we still have payday loan companies operating, but citizens don't have to get continuously rolled over, and
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they get a much fairer deal, and they still have access to credit. they have access to credit at a much lower rate, so it's a complete win. and the pastor who testified this week noticed that and, certainly, many of the pastors in my state working directly with poor families see that. is that your impression as well, that the consumer gets a much better deal when they get a low interest rate than when they get a high interest rate of 500% or more? >> what i think you would say that is quite powerful is there's often this comment made, well, there aren't a lot of complaints about payday loans. i mean, people going in and being treated well by being rolled over, rolled over, ultimately, can damage their finances beyond repair. i would say talk to the faith community. i'd like each of you to talk to ministers and leaders in their states. they can tell you the stories
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they hear. we hear horrendous stories of the effects of this on people's lives. and they are repeated in massive volume across the country. that's a good place to start in trying to understand this issue. >> amen to that, and thank you, mr. chairman. >> senator toomey. >> thank you, mr. chairman. mr. cordray, welcome back. >> thank you. >> thanks for being here. as you know, section 1071 of the dodd-frank act instructs the bureau to collect data on small business lending. and i noticed recently that the cfpb has posted a job listing with reference to 1071, and it described the job as, and i quote, once in a career opportunity to make the market for small business finance fairer and more transparent. end quote. so is it, is it your intent that
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the market will become fairer and more transparent by virtue of the disclosure of data? is that -- >> i think that's clearly what congress said to us by mandating this -- >> well, it is your words in the job description, so that's why i want to understand your intelligent. >> i hope it is a good opportunity, and i hope you'll recommend candidates to us. >> okay. is so my question is, is it your intention that the bureau will limit its work in the small business space to the compilation of data? >> so what i would say is we don't have much authority in the small business lending area, and is so that is what our focus under our statute is individual consumers -- >> right. >> products for household purposes. but there are a couple of places in our statute. you know, again, congress said it, not me. we have jurisdiction over small business lending under the equal credit opportunity act, and we have this 1071 that you identified here which is a mandatory job congress gave us -- >> yeah.
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>> finish to set up a reporting, data collection and data publishing regime for small business lending comparable to that for what has been created for the mortgage market, yes. >> yeah. so my understanding is what dodd-frank does in section 1071 is exclusively about day collection. that's the only authority that i read for the cfpb with respect to small businesses in section 1071. is that your -- >> yeah. 1071 speaks for itself, we're doing our interest to implement it faithfully. it's going to be a big job for us, but it is a task congress instructed us to do, and so we follow the law. >> yeah. getting back to this issue of your approach to enforcement, you gave a speech before the consumer bankers' association in which you were, essentially, defending your enforcement approach. and one of the things you said in the speech, and i'll quote. it says: any agency is bound to recognize that they should
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develop a thoughtful strategy for how to deploy their limited resources. that means working towards a pattern of action -- by which i think means enforcement actions -- >> correct. >> -- so as to create deterrents that can be readily understood and implemented. that reads to me, that sounds to me like we're talking about enforcement as a substitute for rulemaking, at least in some cases. and one of the things that concerns me about that is that the rulemaking is a, an entire process that requires a level of transparency and gets input x there's a cost benefit analysis. and my worry is that if we're using enforcement instead of rulemaking, that we're going to miss those pieces. what is -- >> so if i may, i'd be glad to speak to this. and i saw a lot of testimony on
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tuesday about this where people make sort of perfunctory nods to, of course, we have to root out fraud but, you know, shouldn't do much more than that. 90% of the $11 billion in relief through i our enforcement actions has been in cases where one or more of the claims involved deception, lying to customers or prospective customers. that is good, solid law enforcement as far as i'm concerned. now, as to the pattern of orders, i think everybody would agree that basic fairness in law enforcement is that if person a or institution bank a, say, is doing these things and they're found to violate the law and action has to be taken in consequence, that everybody else in the market that is going these things -- >> yeah. >> -- is also violating the law and should stop doing what they're doing. >> i get that. >> so signaling the marketplace very clearly is an unfortunate
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thing, but it's basic. >> i'm going to round out of i'm here. in the case in which you guys discovered discrimination based on the protected class being committed who were not aware of the protected class status of the people they were supposedly discriminated against, you're applying what seems to me a novel new approach to interpreting the ecoa which has been a law since 1974. the justice the president never took your approach -- department never took your approach -- >> that's not true. >> the justice department used your model? >> in 1994 joint guidance was put out by the banking agencies and the justice department, we weren't around then, that said this is the law -- >> so you're using that model? >> yes, it's the law of the land. >> and the met doug of determining people's race, that's from 94?
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>> it goes back from the '70s and employment discrimination law and the like. and the guidance we issued early on simply said we're a new agency, so people might not know what our position is. we join our fellow agencies and the justice department in believing disparate impact is law of the land, and the supreme court reaffirmed it's the haw of the land, and to me, that's pretty conclusive on the subject. >> okay. so i'm now learning something new which is the methodology that you've learned for identifying race and identifying people's status this their, in these protects lasses is decades old -- classes is decades old x there's nothing new there, you didn't come up with no new models. >> no, that isn't what i said. >> so it is new. >> no, no. let me f i may be, disparate impact is the law of the land. it's -- >> that's not what i'm talking about. >> -- since well before 1994. it continues to evolve. there have been cases since
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then, and there have been modifications in this or that approach, this or that methodology, but the law is clear -- >> you're changing the subject. >> no, i'm not. >> you've described it as an evolution. however you choose to diabetic is fine. -- describe it is fine. it was not subject to the transparency of a rulemaking process. >> i don't think that's true. if you looked at yourself ten years ago, you're the same person then you are now, but have you changed in certain ways? very likely. you may look a little different, you may think a little different, but you're the same person. disparate impact has been around for decades. there's been case law on this. people have adjusted to the case law. people have taken input from congressional leaders and others and thought maybe that's a better approach and thought to refine that. we should certainly continue to do that, i would think. you're trying to do that with me today. >> and all i'm suggesting is if you're going to do that and
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you're going to develop a new methodology for identifying people's is status in a protected class, it ought to be in a transparent process, and that's part of the way the rulemaking process is designed and what it's meant to achieve. and you chose not to use it. >> it's certainly fair game as to whether you or others think and whether we agree that we have or should be as transparent as we should be. and that's always a legitimate grounds for discussion, and i'd be happy to have our taffe talk further with you around what we've tried to do around transparency. to say this is a methodology that is radically different than anything before, it is modifications and developments on law that's been around for decades, law that was resoundingly reaffirmed by the supreme court just last june, and this law that i believe we are required to enforce. and why are we required to enforce it? because it's supposed to root out discrimination against individuals based on their racial or ethnic origin or gender. and it's very un-american. and this is the way in which congress developed this law, and
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the supreme court has interpreted it, and we believe that it is our job to do to enforce it. >> thank you, mr.chairman. >> senator warren? >> thank you, mr. chairman. thank you for being here today, director cordray, welcome to your 61st hearing. as you know, the payday lending industry is now doing $7 billion a year in loans. there are now more payday loan store fronts in america than there are starbucks. plus all of the online payday lenders often charging 200, 300, even 400% interest. now, when emergencies arise, people need access to credit, but payday lenders that build business models around trapping people in a never ending cycle of debt are throwing bricks to a drowning man. director cordray, i know the cfpb is close to issuing its payday lending rules, is so i want to ask you three questions about this process. first, can you describe the research and data gathering that
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the cfpb has done to try to figure out where to draw the line between preserving access to credit and trapping people in never-ending psychs of -- cycles of payday loans? >> yes. here we've engaged in the most comprehensive research ever done by anyone on this marketplace. we've done two significant white papers, analyzed millions, millions of payday loans across all types of lenders. and what we found is that the model here is to, in particular on payday balloon loans, is to get someone into a payday balloon loan, and if they had to borrow $300 today, the notion they're going to be able to pay $345 two weeks from now is not very likely, although some do. and great for them. and maybe it works for them. but many others end up rolling it over because they can pay the $45 at the end of the two weeks, but they can't pay the $345, and they can never pay the $345.
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you described these products at 20, 300, 400% interest rates. in missouri we have seen loan products that go as high as 1,950% rate of interest. you can actually lend where the fees amount to 75% of the face value of the loan. that's a $1,000 loan that becomes $18,000 or $20,000 by the end of the first year and goes on from there. and this is from a class action decision by a missouri appellate court in which they read out of the record some of the actual instandses of people who borrowed $900 and ended -- 100 and ended up paying back thousands and still ended up owing thousands. that is not a recipe for success for people. >> thank you very much. let me ask you a second question. states currently have different standards for regulating small dollar end lending, but you would create a single national floor so states could still issue stronger restrictions if
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they wanted to, but they couldn't drop below the cfpb standard. can you explain the benefit of having a single baseline rather than just a lot of different local rules? >> sure. in fact, this is the same approach we took in our mortgage servicing rules where we established a baseline of requirements on mortgage servicers. not on states, by the way, but on mortgage servicers and said that states were free to add further requirements on mortgage servicers if they deemed it appropriate to do so. and by the way, this is a approach that's been common in american law in our system, federal itch. it's true of -- federalism. it's true of antitrust law, environmental law, it's true in many different areas of law where the federal government may intervene to a certain degree and set certain requirements on individual citizens and companies. the states are free to have their own regimes x they do. and they set requirements on individuals and companies. and the two systems coexist. this is, there's nothing unusual about this.
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it's been described as cooperative federalism, and it works reasonably well. it can be a little complicated at times, i suppose, but a federal system is bound to be a little complicated at times. >> all right, good. thank you. and let me ask my third question here. the cfpb's been work anything this area now for three years. you've been gathering data as you've described, drafted different approaches, talked about it with industry. now certain members of congress have proposed imposing an additional two-year they on your efforts. can you give us some idea about the impact of that delay and estimate how many more families will get stuck in a debt trap during that time? >> so i feel keenly already the amount of time that it takes to embark on a federal rulemaking in an area that is a baseline of no research previously. it's taken us several years to do the kind of detailed research that you asked me about and i described.
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it is taking us time to go through the processes in our statute including a small business review panel and report and so forth, and we are now on the verge of actually proposing the rule. and it will take time to work through it and finalize it. i feel keenly that every day that passes if you think a rule is going to improve life -- and it may or might, but if you think it is going to improve life, you'd like that to happen as soon as possible. and delay for delay's sake simply means if there are harms here, and our research has identified harms to consumers, then they will go on. and that anybody should feel like that's no big deal means they simply disdegree with the findings around -- disagree with the findings around the country of what this does for families. and i can't agree with that. >> we're talking about perpetuating a lot of misery here. >> yes, that's right. >> i want to thank you, thank all of the people who work at the cfpb for their terrific efforts in this area. you know, i know that the payday
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lending industry hires a lot of lobbyists, and they make a lot of political contributions to try to protect their multibillion dollar business. i also know that families that get cheated by payday lenders don't have hobbyists, and they don't have political action committees which is why the independence of the cfpb is so important. you know, i hope you will move quickly to complete your rulemaking on payday loans. you are the best hope for millions of american families to avoid these debt traps in the future. thank you for your work. >> [inaudible] >> thank you, mr. chairman. good morning, director cordray. >> good morning. >> not too much longer, and it will be good afternoon. [laughter] >> i was wondering myself. didn't know. >> director cordray, in a recent
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speech before the consumer bankers' association, you discussed your philosophy on consent orders. you'd said that, and i'll briefly lay this out, our public enforcement actions have been marked by orders in which, which specify the facts and the resulting legal conclusions. these orders provide detailed guidance for compliance officers across the marketplace about how they should regard similar practices at their own institutions. what i'm what to talk about a little bit, my concern is that the consent orders without a finding or even an admission of guilt, the allied settlement is an example of that, could mean little more than a company's business decision to settle a lawsuit with minimal expense. my question is, is do you agree that for compliance officers to
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consider following a decree from another company, that decree should be a part of either a court finding or contain an administration of guilt? or if not, come from as senate toomey was alluding to, perhaps a rulemaking process laid out clearly, definitively? and i'm just -- your thoughts on it. >> sure. first of all, allied's a great example because we worked there in partnership with the justice department, and they as part of their process were obliged to file an order in court that the judge had to sign off on. if that's your issue, then ally is not a good example of it. if you're trying to address harm to consumers out this in society, there's a number of ways you can go about it. you can do your own research and try to think about what you think is best and go through a process to adopt a rule, but another way and one tool congress gave us very specifically and emphatically is to investigate facts of individual circumstances, and if
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you find an actual violation of law, clean it up. and that's what we do all the time in enforcement. and what i say about sort of rulemaking by enforcement which is kind of a nice slogan people like and somehow that's a bad thing, if we find through a thorough investigation and the institution typically doesn't dispute the facts that we find, that that's a violation of law, then everybody in the country should be able to see transparently that if they have similar facts and similar practices and similar situations, they're violating the law, and they ought to stop it right now. and what i said in that speech and i stand by it is it is compliance malpractice for other institutions not to look carefully at our orders in these cases. whether they're entered in administrative or court order, and not to think about am i doing the same thing? am i violating the law? and should i clean that up? that's a basic of consistent, uniform law enforcement. and people can call it regulation by enforcement, i
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call it good, solid law enforcement. >> even though there was no admission of guilt in this particular case. >> that doesn't have to be an admission of guilt. we did a thorough investigation. we found the facts. our decree will state the facts as we know them to be. whether the institution agrees with that or not doesn't matter to me. in the end, the facts are the facts x. if other people find the same facts in their organization, their on notice -- they're on notice to clean it up. and when we come to supervise them, we will be looking to see if they have similar practices, and they will be treated similarly. the key principle here is the basic principle of justice which is similar situations should be treated in the same way. and it shnt just be that -- shouldn't just be that one institution gets whacked and ore institutions go -- other institutions go blithely on doing the same things. and we try to be a.n.s.w.e.r. quick as -- as quick as we can, and when we act through spfgz
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which is a confidential process, periodically we put out our supervisory highlights that tells you what we found in general at banks and other institutions, what we thought violated the law, what we did about it, and people should take account of that as well. >> okay, then let me just slide this in a little bit, a little bit different approach, and that is with regard to the way you've looked at offering no action letters. >> okay. >> i know that you've finalized your rules on the no action letters, but it seems like what we're really challenged with here is do you, do you start out by saying, look, heads up on your enforcement actions, and that's the way that we're going to be basically laying out the guidance of how we're going to be interpreting and enforcing the issues. and yet when you have companies that ten back in and ask -- that step back in and ask for guidance, and by that i mean in the bureau's rulemaking it's estimated that it would issue no action letters only in
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extraordinary circumstances and anticipated issuing about 1-3 letters per year. by contrast, the sec has issued 104 no action letters in 2015. it looks to me if companies are asking for guidance on this, wouldn't it be fair to say rather than going through the process of trying to adjudicate it -- i mean, would you consider thinking twice about really not issuing no action letters as -- >> yeah. i actually think this is a very legitimate line of questioning, and i'm not sure that i'm satisfied with where we appear to have landed on this, although we did issue that to get something going in the area. there are different agencies, we looked at a lot of agencies. some of them do a lot of this. the irs does them by the hundreds. others do very, very few. the banking agencies tend to do very, very few. i don't know what the right answer is for us, but i feel keenly, and i've had this discussion on the other side with representative heck who's
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been very persuasive that a process that ends up not really amounting to anything isn't really worth anybody's while. i tend to agree with that, and we're leery of how much volume we can handle, but we've begun to get inquiries, and we're setting up a process to see how -- >> well, i think if there's questions out there and they're asking for guidance, it seems like it would be reasonable to try to find a way to work with them rather than end up in an adjudication process -- >> yeah. another thing i would say on the enforcement and regulation differential, regulation is something where where we feel the law needs to be changed in certain ways, and we have authority to do that subject to congressional authorization and oversight. enforcement is more -- the law is what it is x it's applying it to specific facts and finding specific facts. and the facts are powerful. you know, when the facts show that -- >> i hate to cut you off, but i know the chairman's time
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valuable as well, and i appreciate your -- >> thank you. >> thank you, mr. cordray. >> senator donnelly. >> thank you, mr. chairman. and we can now officially say good afternoon, mr. cordray. >> all right, thank you. >> director, one of your recent undertakings has been related to auto finance companies. the cfpb finalized a rule to supervise large bank auto finance companies and also reached separate agreements with several auto finance companies to limit loan pricing and compensation. i've been hearing from a number of auto dealers in my state with their concerns on this issue, and i just want to ask to make sure that you work with all the stakeholders involved in this issue including auto dealers to make sure we get this right, to make sure there is continued access and that everybody be treated fairly in this process. >> okay. and, by the way, i would say that in the early going we were kind of leery about talking to auto dealers, because we didn't want anybody to think that we were crossing that line and
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trying to enforce the law against auto dealers, which we do not have the authority to do. but we've always understood ourselves we have authority and, therefore, responsibility, to address auto lenders. i wouldn't necessarily have drawn the statute up the way it was drawn up, where there was a distinction made between the two because they tend to work together in the marketplace, but i don't see how we can address practices of auto lenders without having some effect on auto dealers. so we are quite willing to and engaged with taking input from dealers as long as they're clear we respect that line. >> understood. like you said, these are some of our small businesses that employ the most people in our towns, they're our friends and our neighbors. >> yep. >> and they want to get it right for their customers as well. >> and by the way, i worked closely with them in ohio. i was the ohio attorney general. we had a program where they had opportunity to correct problems before we took action that worked fairly well. we had the general motors and chrysler bankruptcies that unfolded while i was attorney general.
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we worked to save dealerships across the state who were being cut off by the manufacturers, and we created procedures for them to appeal, and many of them were saved. i understand and very much agree with you on the importance of auto dealers in our local communities. at the same time, if we find problems in auto lender, lending programs, we have to deal with them. that's part of our job. we're a law enforcement agency. but i'm quite willing to have that discussion and engage in it vigorously, and i hope you'll find that nobody says that they're unable to talk to the consumer bureau if they have a concern. that's not what i intend. >> another area i wanted to mention an area important to my state because we have so much manufacturing in this area, and that would be manufactured housing. we have previously discussed the impact of cfpb rules on manufactured housing lending, and i do have concerns that new rules would negatively impact the ability of consumers to buy, sell or refinance these homes as
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financing for smaller balance lopes, you know, is become -- loans, you know, is becoming more difficult. there's been a seeming act -- acknowledgment of some of these challenges. high cost manufactured housing loans have basically evaporated at this point since the rules went into effect. and my question is, does that mean that lenders have reduced rates to get under the threshold, do you think, or is it that lenders have just stopped taking applications that they previously accepted? >> i actually don't think there was ever much high cost lending in the manufactured housing market. so i don't think it would be fair to say that there was, like, a lot and then it evaporated. i think there never was much, and people have shied away from that. i do think there's a lot of pricing that does, exactly what you just said, comes in just under the threshold so that it doesn't qualify as high cost loans, and that is the nature of this market it seems.
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having said that, you've raised this issue with me and some house colleagues have raised the issue with me, and we went back and did a white paper to try to understand it better because we realized we didn't understand it as well as we'd like, and i would acknowledge in ohio, my background i've seen -- and i'm sure it's true in indiana as well and many states -- there are areas of the state where this is going to be the practical means of finding housing on difficult properties, rural properties, topography issues and the like. our white paper showed there's been a long-term decline in manufactured housing. i don't know what all the causes are. i think our folks didn't really feel that they understood that, but it's been true for about 20 years. >> yeah, suggest a good portion of that as you look at your white paper is access to capital, capital challenges that are out there. >> uh-huh. >> because as you said, it's not fair to the rest of the country to think the rest of the country all washington, d.c. townhouses. >> that's right. >> that go for a million dollars.
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>> agreed. >> and that family back in indiana, that family in ohio, they very much just as much as a family here -- >> absolutely. >> -- wants to have a place to call home. >> yep. >> and to raise their family. >> and by the way, wants to have a place they can call home and not be gouged on it. that's important too. >> yeah. >> how to balance those things, is an ongoing issue. >> we agree on that, and in most every case i don't assume my local community banker is out to gouge anybody. >> i would agree with that, although there are some sharp practices in the manufactured housing market we have seen, yes. >> thank you, mr. chairman. >> senator moran? >> mr. chairman, i know we're out of time, i'll be very brief. director cordray and i have had a longtime exchange about this issue that seems to be getting a lot of anticipation, indirect auto financing today in this hearing x i would indicate to the director that rulemaking, not enforcement, would be a better path for the cfpb to pursue.
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and then i want to associate my remarks with you, mr. chairman, and what you had to say about indirect auto financing. none of us agree that discrimination has a place. we just with, we want discrimination out of our economy. this agreement extends the need for vigorous enforcement of the equal credit opportunity act. however, i'm concerned that the cfpb auto financing bulletin has resulted in more adversarial relationships between the bureau and the industry, and i wanted to highlight finally, purchase, that i've introduced senate bill 2663 reforming the cfpb indirect auto financing guidance act, and this is legislation identical to what passed the house in a bipartisan way 332-96, and i would encourage my colleagues to join me in accomplishing that legislation. and it's simply an opportunity not to eliminate cfpb's indirect auto financing guidance, it's a
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way to improve the process and include the try in consumers, members of congress in the process. thank you, mr. chairman. >> thank you. senator visit earth? >> thank you, mr. chairman, thank you, mr. cordray. i know our vote has been called on the floor, so i'll be brief -- >> okay. >> -- summarizing two real areas of concern. and, mr. cordray, if you could give a general response and if you care to follow up in more detail, perhaps in writing, that would be great. >> okay. >> first area of concern is remittance transfers, international money transfers. i think cfpb has spent a lot of time and money and man hours on rulemaking for that. but it has been criticized by gao and others for not setting to bed abuses yet. and so i have a three-part question. what's the summary of resources that have been spent on that, number one.
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number two, what's your response to criticism like gao about not adequately handling problems in that remittance transfer area? and number three, has your oversight quantified and looked at the widespread use of this by folks in the country and working in the country illegally and sending money overseas which, by the all accounts, is a very widespread practice. second area of concern is conflicts of interest involving corey stone. as you know, he's assistant director, office of deposits, cash, collections and reporting markets at cfpb, and he's the lead staff or on the payday rule. now, i'm concerned about p conflicts there because he was a senior executive before cfpb,
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was a senior executive for a company he started which solding out to a rival called microbuilt x. they worked with folks within credit files seeking financing, the type payday lenders would perhaps have as customers. corey stone sold his stock in that company to his brother to avoid a conflict as he was coming to cfpb for $18,000. that stock has been valued recently at between $250,000 and $500,000. seems to have been way undervalued in order to allow him to get rid of it to come to cfpb, that's number one. number two, he's in charge of this payday rule, and depending on how that rule is written, that could increase significantly the business, the
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market, the profitability of his former company, his brother's company. have you hooked at those -- looked at those serious conflict issues? >> so i'll take that one first. i have never heard any charges against mr. stone. i think this is baseless. i think it's bogus to raise it. if you want our staff to talk to you about that situation, we'll be glad to do so. he's one of the finest public servants i know. he has been commuting and gone extra lengths to make his work at the bureau work. i don't, i do not believe there's anything to anything you've just said about him. he is a public official with great integrity. and if there's more that we need to talk about about this, i'll be happy to talk about it with you. >> okay. can i follow up on that? are you aware of the stock issue? >> look, people, people who come to work at the bureau, some number of them came from the private sector.
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usually you all think that's a good thing. you don't want us to have everybody -- >> but are you aware of the specific stock value? >> they divest assets when they come, and they divest them for fair market value. now, at the time he came to the bureau, it might have been right in the wake of the crisis. the entire stock market was down more than 50% at the time, so i don't know what the details is. everything corey does is with high integrity. >> what i'm asking you is have you looked into that issue and come to a conclusion or not? >> our ethics department that's everybody's -- vets everybody's divestiture of assets before they're hired at the bureau. i don't believe there's anything to this, but we'll be glad to follow up with you -- >> follow up in writing, that would be great. >> yeah. and. >> and then the second issue, the first one is this remittance issue. >> this was the first rulemaking we did. we were required to do it by congress. again, not a task that we set for ourselves, but a task you
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all set for us. the rulemaking is in place. whether it softed all the ongoing -- solved all the ongoing abuses, it may or may not have. we will take enforcement actions as necessary if we find abuses. if you're aware of abuses specific that we should know about, we will follow up with you and be glad to hear what they are so we can consider whether to investigate them. but i do think it's quite possible our rulemaking hasn't solved every problem in the marketplace x to the extent it hasn't, we want to continue to pursue -- and i forgot the third part of your question. >> related to that was does your rule making and does your enforcement and tracking address what seems to be massive use of this many money transfer opportunity -- this money transfer opportunity for folks being in and working in the country illegally and sending money overseas? >> our rulemaking does not address that. congress did not direct us to address that, and those would be
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issues for for other parts of te federal government and not us. >> so you don't track any of that activity? >> i don't believe we do, no. >> okay. would the same apply if we're talking about organized crime or some illegal sector using the same remittance opportunity? >> i don't think we track undocumenteds in any of the markets, credit cards, mortgages. we're not trying to dig into bank of america, citibank and ask them what kind of documentation have you asked for. if those are issues for someone in the federal government, it would be elsewhere -- >> i'm saying for you would the same response apply to illegal activity, say organized crime? >> usually i come here and people are criticizing us for trying to expand our jurisdiction. we're looking at mobile cramming on cell phone companies. you'd like us to look into organized crime and undocumented -- >> i'm asking -- >> we don't. that's not typically. >> -- if it would be something you'd care about or look at.
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>> that is not part of our limited consumer finance jurisdiction. >> thank you. we'll follow up on this as well. >> thank you. >> thank you, mr. chairman. >> yes, sir. thank you, senator vitter. i'd like to take a moment to respond to comments made earlier here at the hearing by the director to the ranking member. he's correct that ago regate credit availability has been increasing, but that is what you would expect in a near zero interest rate environment. this does not mean that there are not specific issues in certain credit markets that may be exaggerated by some of the bureau's actions. for example, more categories of credit may actually be in decline. multiple studies have found that small business lending has declined while the volume with of loans to large businesses has risen. in addition, research from harvard university finds that credit cards issued to certain lower million consumers have fallen by 50%.
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these are economic trends that i hope the bureau takes into serious consideration in your day-to-day, you know, work over there. another thing -- >> i'd be -- >> you want to comment? >> could i? yes, sure. so small business lending, you know, we haven't adopted any regulations, we have very limited capacity there although -- >> but you alluded to small business lending earlier. >> yeah. we have a job congress gave us that we have not yet fulfilled to develop the recording and data collection for this. but none of, none of that small business change could be ascribed to the cfpb. and as for credit cards for low income, i want to take issue with this. it was said -- >> [inaudible] harvard study that i alluded to? >> if that's the luxe-green study, it's not a credible study, and i'd be -- >> the it's not a credible study because you disagree with it or because -- >> because it isn't well done,
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and it isn't credible on the supposed evidence -- >> would you furnish your concerns about the study? >> be glad to do that. but i would say on the credit cards for low item, mr. s wiki was talking about 2008-2012. most all of that crash is due to the fact that households lost $12 billion in net worth in the wake of the crash. and he says it's hard to separate that out from the effects of new rules. we didn't even come into existence until july of 2011, so trying to pin all this on us is pretty him from program in, if you ask me. flimflam. >> it liked to somewhere statements concern enter statements from the following groups on assessing the effects of consumer finance regulations. in today's hearing on this consumer financial protection bureau semian yule report --
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semiannual report to congress, the statements include statements from the independent community bankers of america, the consumer bankers association, the national association of federal credited unions -- credit unions, the credit union national association, the american financial services association, the electronic transactions association, the chamber of commerce of the united states, the national automobile dealers association, the mortgage bankers association, ap article published in the american banker and, finally, an article from the new york post regarding ally's financial experiences with the bureau. without objection, it's so ordered. >> i'd be glad to have access to those so we can consider them for improving our work. >> we will, we have a public record. we'll share with you, we want you to share with us too. >> yeah. but with, again with, going back to that credit card so-called data, at the time a tsunami hit
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the beach, the financial crisis, that somebody's garden hose might have been pouring water on the beach at the same time is hardly relevant, in my view. >> mr. cordray, thank you for your appearance before the committee. >> thank you. >> education secretary john king heads to capitol hill today to update lawmakers on implementation of the every student succeeds act. it was signed boo law i this past -- into law this past december. you can watch the hearing live 10 a.m. eastern on c-span. and at the same time, irs commissioner john koskinen joins representatives from the treasury department and government accountability office to testify on what's being done to protect taxpayer information from cyber net. that hearing -- cyber theft.
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that hearing is being held by the senate finance committee. live coverage on c-span3. next, federal reserve chair janet yellen joins three of her predecessors for a discussion on monetary policy and decision making by the fed. the other speakers are ben bernanke, alan greenspan and paul volcker. this was at the international house of new york. it's an hour and 15 minutes. [applause] >> well, welcome, everybody. i'm the dude from the video. [laughter] i'm also the president and ceo of international house. i want to thank you so much for this historic occasion. we are very, very excited this evening to have what we call the fabulous four fed chairs. and this evening is going to be spectacular for a variety of


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