>> it's as if all the loss, all the misery of the great recession never happened. if you doubt of the benefit of effective consumer protections,

then please take a look at what the center for responsible lending had to say about the effects of my credit card my credit card bill of rights that was passed with broad bipartisan support in the last congress. the study shows that the credit card act of 2009 has reversed much of the unclear pricing on credit cards without leading to higher rates for more difficulty in getting credit. and furthermore that greater transparency about the real costs of credit makes it less likely that consumers will get in over their heads. something many believe is one of the contributing factors to the great credit crisis. this is all reflected in the fact that consumer complaints about credit card company practices have dropped dramatically since the implementation of my bill. but the consumer financial protection bureau how we can begin to do for all financial products what the card bill due

for consumer credit cards, make the arena more competitive, and the products fair, less deceptive, and more transparent so that consumers can compare costs. these are all traits, and efficient free market system needs in order to thrive. the bureau is designed to be funded through the fred just as all bank supervisor ages are independently funded. in order might be just that, independent. this is vital in order to avoid the kind of politicizing of its mission. the claim that the cfpb will not be subject to oversight is simply not based on reality. the cfpb director will testify twice a year to congress. the board will report annually to congress on its budget and operating plan. it will submit quarterly financial reports to the office of management and budget. the government accountability office will do its own audit.

the financial stability oversight council will review all cfpb regulations, and can overturn them with two-thirds vote, and unprecedented power. the administrative procedures act allows for federal court to review agency decisions, and congress as the majority party in the house can overturn regulation. elizabeth warren has made it clear that she favors free market solution, but like the vast majority of americans she is opposed to the use of deceptive, predatory, or anti-competitive practices. i would like to end by quoting her from her recent address to the consumer union, and i quote. we want to see innovation, lots of innovation, but innovations need to be around real product differences that consumers can see and understand, not around

misleading advertising and new tricks buried in the fine print. our goal is simple. we want the credit market to work better for consumers, for responsible providers, and for the whole economy. thank you, and i reserve my time in the event that others have opening statements. >> thank you. i'd like to recognize the chairman of the full committee, mr. bachus, for one minute for making an opening statement. >> thank you. what you just heard from the gentlelady from new york is sort of what i think the press is also, that's their message. and their message is that this is all about politics. we don't like consumer protection. nothing could be further from the truth. in fact, my bill is for a commission which is what this house passed. this is what we passed in dodd-frank. it was changed in conference to

allow one person to run the agency with total discretion. and what we are advancing is not politics. it's the way government has always functioned, and that's not one person with unbridled authority. you've also come and let me say this, professor warren has done a great job of really fooling the national media into thinking oh, this can easily be appealed. nothing could be further from the truth. sean duffy has introduced a bill which is as important as will i am introducing, which tells you that you can even appeal a ruling unless the ruling would bring down the whole financial system of the united states. how absurd is that? you have to file -- some have to file within 10 days of the consumer protection bureau issuing something. 10 days, that's absurd, it's

unheard of. its design and its super majority, not even two-thirds, 70%. and i tell you what, no one has gone past this crazy story about that we are just attacking ms. warren, or that we don't want consumer protection. and really, i think the american people, and i know this congress is more sophisticated to believe that. and if they're able to hoodwink the american people, they pulled a real shame here. i'm advancing the same language that add one in the house was the appropriate solution. it's what's been discussed for years about polling everything into one agency, and it being a commission. but someone in the dead of night decided they could just do whatever they wanted to, whenever they wanted to. and that the press would not tell the american people. this is not about elizabeth

warren. this is about giving one person total unbridled authority. and power. >> thank you. i'd like to recognize mr. scott for two minutes. >> thank you very much mr. chairman, and welcome panelist. this is indeed a very time and a very important hearing. i think that a sensual is two points that i think we have to explore today and make sure we get our hands under. one is that how do we adequately put forward the machinery that will effectively do two things. protect the american consumer, and make sure that in the process of doing that that that consumer does not lose valuable access to credit. those are the two things that we have to do. and we have to explore we have

to really respond to some of the fears that are out there and make sure that we answer before we move forward. at this effort does or does not clamp down unfairly on the financial services industry, that has to both help protect consumers while certainly the same time make sure access to credit is there. so i want to get some answers to that. i want to get some answers to these concerns. because we can't do it without financial services industry. and we have to make sure that they're not going to tighten up our credit if such procedures are in place. and i think in so doing we will do the american people a great service. now, my friend chairman bachus has an interesting bill. can we do this by committee?

can we do it by commission? if so, what will be the political makeup of the commission? if it's three and just two political parties, somebody is not going to have a fairly good chair when the music stops in terms of balance. i think that we have to be very thoughtful as we move forward. and again, madam chairman, i know my time is about up with a major point in i want to impress his, what i'm after is making sure that we indeed are tech the consumer, educate the consumer against their predatory practices against the abuses that have caused so much of the problem that we are in today, while at the same time ensuring that it does not lose the vital access to credit. thank you, mr. chairman,. >> thank you. i'd like to recognize mr. royce for one minute for the purposes of an opening statement. >> thank you, madam chair. the july 21 deadline is quickly

approaching her, and it's director is eventually appointed we will soon be left with an agency unlike any other, given the way this was written. for the first time there'll be a director who served a set term, has sole authority over the agency of its actions, and has access to hundreds of millions of dollars outside of the appropriations process. so it's a bad president. it would fundamentally weaken our revelatory structure by moving safety and soundness regulation of the backseat, when i offered earlier during the markup when this bill became law, was something that the prudential regulars water. they see what happened with oversight over the gses. they thought it was a bad idea to move safety and soundness regulation to the back seat. and, frankly, this bill takes a critical set by atlanta safety and soundness regulators to have a greater say in a sea of tb by lowering the threshold for a rule to be struck down. and i would also add, mr. scott

raise the concerns about access to credit which i think is something we need to be worried about. i think beyond that this worry about tying the hands of the regulators on this is a road we have been down before, where congress did this with respect to fannie and freddie, and we had a very bad consequence out of the. so let's give the prudential regulators a greater say in this process. thank you, madam chair. >> thank you. i'd like to recognize mr. miller for two minutes. >> thank you, madam chair. cfpb is an agency unlike any other. it probably has more checks on its authority, more accountability than any other agency of the government. it certainly is not unique in that it is not subject to usual budget process. every regulator, every regulator of the financial industry is funded separately rather than have to come back to congress hat in hand to be turned away by the influence of the financial industry to restrict their

ability to do their job. in that way they're certainly not at all different than anybody else except they have a cap on there's that none of the other regulators have. they are serving not unique in they have a single director. for instance, has a single director, and that has made that a very powerful agency which has worked greatly to the benefit of the baking interest and greatly to the disadvantage of consumers. so it was certainly not in that respect at all unusual. when the industry talks about safety and soundness, they need to keep safety and soundness together, congress did limit the authority of cfpb. the cfpb cannot require any bank to offer any product. they can only prohibit practices that a determined to be a piece of a consumers. so when a bank says they will consider safety and soundness, what they are saying is in order to stay in business, they have

got to do things, they've got to do things cfpb has determined cheat consumers or the language of the statute i think are unfair, deceptive or abusive. they say they have got to be unfair, deceptive to stay and visit it may be that need -- maybe that bank needs to out of prison. >> i'd like to recognize mr. mchenry for one minute for an opening statement. >> thank you chairman. this legislation today we're looking at, it will go a long way to providing the necessary oversight of the consumer financial protection bureau. in order to ensure the consumer protection rules can implement without risking the safety and soundness of our nation's financial system. last november the voters sent a clear message to washington. massive new regulations are grading uncertainty and crippling job creation. with them on and with the legislation force today is extremely necessary in order to protect consumers while also

making certain that small businesses and individuals are not limited from accessing the credit that they need. while our economy is still fragile this legislation will remedy a flaw passing the final dodd-frank piece of legislation. i would say to my colleagues on the other side of the aisle this idea to create a very limited regulator while having 59 votes in the senate and 60% of the house of representatives and a democrat president is absurd. they're bragging about how powerful this regulator was until after the election. we are trying to fix this problem and go back to a more balanced approach in the cfpb. >> thank you. i'd like to recognize mr. pierce for one minute for purposes of an opening statement. >> thank you, madam chair. i just want to address some of the comments coming for friends on the other side of the aisle that innovations need to be somehow controlled over dangerous innovations and i think growing up in a family where the innovations, the phone

industry were stop for decades. the we grew up with this one black phone, big everything. as soon as that was deregulated, though scary changes began to come onto the market and cell phones and ipods, ipads, whatever. and so as i think about choking down the financial sector, it is going to do exactly what one of my other friends on the other side said, it's going to limit access to consumers for the situations where someone does cheat or take money away from someone. there is a remedy. stick them in jail. when people cheat, somebody else, have an outcome but we don't need to choke down the entire market in the name of safety. such a steal back the bouts of my time. >> thank you. i would like to recognize mr. gesink a for the purposes of one minute. >> thank you, madam chair, that i appreciate you doing this today. we're here to discuss a

legislative proposal which create a more transparent and accountability for what some have labeled an independent agency, some of us would maybe characterize it as a rogue agency that congress created last year. and under his dodd-frank, the cfpb, consumer financial protection bureau, we'll have extensive authority to issue on the federal and financial regulations that affect businesses and individuals but with very little accountability to me that is unacceptable. if i'm doing a bad job i had to answer to the constituents. at the present is not effective he has to answer to people in an election situation. who does ahead of the cfpb report to? no one. i mean, that's part of the public as a newly elected member of the 112th congress, and a member of this important committee, i'm here to work for that change. and madam chairman, i again appreciate your willingness to hold this hearing on this

important issue, so thank you. >> thank you. i'd like to recognize now mr. dole for one minute for the purposes of giving an opening statement. >> thank you, madam chair, and i want to thank the witnesses for your time today. both before and after legislation is pass congress has an obligation to identify and correct unintended negative consequences that frequently arise from what many would say is well intended legislation. what i'd like to do is i'd like to fast forward because what we do today is going to have applications for many years to come. so let's go for five and 10 years. let's say administration is vastly different. we are empowering one individual that has i think an enormous amount of power. what the legislation does today broadens that out there who want to talk instead of one we want to buy. this seems to me to be commonsense legislation. instead of the power so much one individual we are investing it indeed in a board. been talking a veto authority come it's going to be a simple majority. as opposed to a two-thirds which is a very high standard to jump

over. so i would look forward to your comments in terms of trying to convince the on how this is not a good idea, why we need to invest so much about an individual given the consumer credit industry's importance to economic prosperity, the cfpb broadway go to a mandate should exist within a structural framework that improves transparency and accountability. i thank you for giving me the time. >> i would like to recognize for one minute for the purpose of getting an opening statement. >> thank you, madam chair. out of all other provisions included in the 2300 page dodd-frank bill, perhaps the biggest and most important question surrounding the creation of the consumer protection bureau for the first time we have an agency whose primary mission is supposed to be consumer protection. although it is unclear exactly what the distinction is between consumer protection and safety and soundness. aside from the agencies puzzling

mission, there's a great concern over its structure. ignoring the precedents for financial revelatory agency, the bureau is structured so that it has a single director who will have great influence. this means that one person can determine what types of mortgage products or credit cards americans can have access to. in its current state it is also extremely difficult to overturn a potentially damaging rule proposed by the bureau. it is also worth noting that the funding of this agency has been carved completely out of the normal appropriations process. the powers given to this agency seemed to go out against the traditions of accountability and openness, and it moves us toward creating an american credits are. thank you. >> i'd like, last would like to recommend mr. duffy for one minutes for the purpose of giving an opening statement. >> thank you, madam chairwoman.

quickly i think all of us here on the panel and this committee agreed that we want to protect consumers. i just think we have a disagreement that this bill will publish the goal. we have an incredibly high standard to overturn the cfpb rule. and basically what has to happen here is the cfpb have to create a rule that will bring down the whole financial system. and if that's the case we need to go to fsoc and get three quarters of the vote, three quarters of 10 votes on fsoc to overturn it. the way the rule is written, the law is written right now, the director of the cfpb sits on fsoc. this is a super super, super majority, makes it incredibly difficult to overturn a rule that comes from the cfpb that's going to be damaging to the financial system. i think my bill addresses this and puts some perspective back into oversight of the cfpb and

bring some sanity. thank you, madam chairwoman,. >> that concludes our opening statements. i would like to welcome our witnesses first of all for the purposes of giving -- we have your full testimony and you'll be given five minutes to sort of summarize your testimony. and we have a lot of eager questioners are so we would like to try to stick to the five minutes. first of all i'd like to welcome ms. leslie andersen president and chief executive officer, bank of bennington, on behalf of the american bankers association, for five minutes. >> thank you chairman capital, ranking member maloney for the opportunity to testify today. aba appreciates the chance to share ways to improve the accountability. [inaudible] >> the banking industry fully supports effective consumer protection. at the bank of bennington we are

proud of our eight decades of service to our customers. no bank could be successful without a long-term perspective like ours and without treating customers fairly. the new bureau will certainly impose new obligations on all banks, large and small. banks that had nothing to do with a financial crisis, and already have a long history of serving consumers fairly in a competitive environment. there are several features of your that make improved accountability imperative. these include the problems brought about by the extensive new powers of the agency, the unfettered authority of the director to impose new rules, the separation of consumer protection from bank safety and soundness, the gaps in regulating nonbanks, and expanded and unaccountable enforcement authority of prudential regulators and state attorneys general. we believe the bills that are the subject of this hearing today are a start in the right direction, but certainly more needs to be done. we have detailed recommendations to improve the bureau's

accountability in our written testimony to let me highlight just a few. aba supports h.r. 1121 which would create a commission responsible for the bureau's actions. a board or commission structure is far better than giving the head of the bureau sole authority make decisions that could fundamentally alter the financial choices available for customers. it also provides the needed balance and a proper checks in the exercise of the bureau significant authority. ada recommends that the commission include members with consumer finance business experience in direct safety and soundness regular expertise. such expertise will provide an important perspective as standards are set in enforcement activities undertaken. aba also supports h.r. 1315 that would require a simple majority vote of the financial stability oversight council to set aside a bureau ruled. if a majority of the nations top regulators believe a bureau rule have an adverse impact on the banking system that ruled should not go forward.

moreover, aba also believes that a finding of systemic risk is too narrow. the review standards should be recalibrated to account for adverse consequence of bureau actions that do not rise to the level of systemic risk. in addition to further accountability we believe the bureau should direct its resources to the most glaring gap in regulatory oversight. a failure to supervise and impose actions on non-bank lenders. one simple suggestion is to mandate transparency on the bureau's non-bank expenditures. we also strongly urge the congress to limit the term abusive from the bureau's prohibitions. -- >> excuse me, can you pull the microphone should look closer. i have other folks who still -- >> is that better? >> thank you. i'm sorry to interrupt you. >> no problem. this is the most effective method of keeping the bureau focus on the task of reforming the authorities it has inherited

from his predecessor regulators, and the bureau can shape those more than adequate authorities into simpler, more effective and less burdensome consumer protections. finally, the dodd-frank act gives license to pilot additional state law requirements. it gives additional authority to state attorneys general and prudential regulars to interpret and enforce bureau statutory authorities and the rules as they see fit. if we are holding bureau accountable we must also hold accountable all those who derive authority from its existence. to do otherwise by of our new rules to be written or apply new interpretation each time a state border is crossed would completely undermine the reliance of all citizens on the bureau's rules. chairman capital, makes across this country will continue to treat our customers write and do whatever we can to make sure that they understand the terms of the loans are taking on and obligations to us. our task is made more difficult by the many new hurdles that will have to jump over to serve

our customers most basic financial needs. with only 22 employees, i worry about how my bank can handle all the new compliance obligations that will flow from the bureau and from all of the dodd-frank requirements. more importantly, i worry about the added cost, time, and hassle for my customers that these new rules will inevitably create. 90. >> i thank you very much. i'd like to welcome and introduce our second witness, ms. lynette smith, president and chief executive officer of the washington gas light federal credit union on behalf of the national association of federal credit unions. welcome. >> good morning. chairman capito, ranking member maloney, and members of the subcommittee, my name is lynette smith and i am testifying this morning on behalf of. i served as the president and

ceo of washington's gas light federal credit union in springfield virginia. washington gas has more than 6800 members and over 80 million in assets. nafcu is the only national organization exclusively representing the interests of our nation's federal credit unions, and we appreciate the opportunity to participate in this hearing today concerning proposals to improve the structure of the consumer financial protection bureau. credit unions were not the cause of this financial crisis. and yet we are still substantially affected by a number of provisions contained in the dodd-frank act. for example, all credit unions are subject to the rulemaking authority of the new cfpb. the requirements in dodd-frank

will create a number of new and unnecessary compliance burdens for a small credit unions like mine. it is with that in mind that nafcu has long opposed cfpb's authority over credit unions. we believe that cfpb's singular focus should be on regulating the unregulated entities that contributed to the financial crisis. indications are that some of the first areas that the cfpb may tackle include mortgage lending and credit card practices. areas that we have already seen a number of changes in the recent years. although the debit interchange christ -- price tab remains nafcu's number one concern with the dodd-frank act, i will focus my concerns on the new cfpb.

first, nafcu will urge the committee, the subcommittee, to return authority or rulemaking examination and enforcement to all credit unions to the national credit union administration. second, while we were pleased to see the financial stability oversight council grant its veto authority over some propose cfpb rules, we believe the current veto authority does not go far enough. nafcu supports legislation to modify the threshold needed to veto a proposed rule. third, nafcu supports h.r. 1121, legislation introduced by chairman bachus and others which would create a five person commission to govern the cfpb. we believe a board has benefit

over one single director. at a minimum, nafcu believes that the cfpb must have a senate confirmed director before it becomes an official stand-alone federal agency. we would support legislation to delay the transfer date until a director is confirmed. fourth, only three credit unions are above the current $10 billion threshold, and we would be subject to examination and enforcement authority of the cfpb. we believe it is a waste of taxpayer dollars for the cfpb to have credit union examination teams for only three institutions, when in cua has been handling examining these institutions for decades. congress should transfer that

authority back to ncua. finally, there are a number of other areas where the cfpb could be improved, and i've outlined of those in my written testimony. in conclusion, i remain at a loss as to why my credit union has been placed under a new regulatory regime. that being said, we welcome a dialogue with congress on possible changes to the structure, governance, and authorities of the new cfpb. i thank you for my opportunity to appear before you today on behalf of nafcu, and i would welcome any questions that you may have. ..

did structure and authority of the cftc fails these common-sense attacks. the proposals of some cody is considered provide an opportunity to address issues central to the bureau's mission.

i will start with chairman baucus's built which restructure is the see of pd soo is governed by a bipartisan commission rather than a single director. we strongly support this reform. first, far from singling out the bureau for special treatment the bill would conform the bureau to other independent federal agencies including those responsible for consumer protection like the ftc. today almost all independent agencies follow this model. moreover the decision to place a single director in charge of the bureau far from being essential to the original conception of the agency was made quite late in the legislative game. the original draft bill proposing a consumer protection agency included a commission as did the bill that passed the house in 2009. second we think the chamber believes that a commission will insure better, impartial

decisionmaking. collaborative the liberation among the commission was the first few of expertise and background would be the better policy outcome. by contrast beaters to buy an individual director is likely to lead to an approach over the years. the cftc has a tough act to perform. more stringent rules and stricter enforcement will protect some credit users from fraud as -- we agree with that. as has also been pointed out it could lead to higher prices and access to credit with potentially significant adverse implications for consumer well-being and economic growth. nivens based decisionmaking it a complex area depends on full consideration of diversity of input and views. the third point is we believe a commission approach will minimize the risk of regulatory capture. in the 2008 law review article

titled making credits a fur warren observed a major challenge in establishing a unified federal regulator of consumer credit products is the challenge of minimizing risk of capture. a multi member commission is the best way to address this risk. finally, we think a commission approach will ensure continuity and stability in a way a single director would not. most commissions with staggered terms insures continuous presence of a significant number of experienced members at all times in prevent any gaps in agency effectiveness. it would also prevent significant policy shift based on political winds. moving quickly to mr. duffy's built the chamber supports 1315 because it would enhance the ability to serve as a critical step on bureau rulesmaking threatening the financial system. if every credential regulator opposed regulations the

regulation should stand. pardon me. a majority requirement based on the vote of nine members because we are taking of the bureau out of this for purposes of this provision to permit that result. i would like to quickly also address the discussion before the committee, before concluding, the discussion draft would do a couple things in terms of the laying -- to the first would delay transfer of consumer protection functions to the bureau until the director is confirmed and remove the current authorization from potential regulators to include bureau examiners and examination of large financial institutions prior to the transfer date. the chamber agrees consumer protection functions should remain with their existing agency until the leadership of the bureau has been confirmed. as for the second proposal we also agree if the rate of concern for the examinations a

large financial institutions prior to the transfer date we would support legislation along those lines. thank you for the opportunity to testify and i am happy to answer any questions you may have. >> i would like to welcome mr. hillary sheldon as our final witness on this panel. he is director of the naacp washington bureau and senior vp of advocacy and policy. welcome. >> good morning. chairwoman capito and many of my friends on the committee is a pleasure and honor to be here to share in your discussion about improving the strength of the financial protection bureau. we feel strongly that this nascent agency needs as much support as possible to reach its greatest potential to protect the american public in ways it has never been protected before. the naacp feels a robust -- is

crucial. for too long too many consumers and ethnic minority mayors have been underserve and targeted by unfair and un scrupulous predatory financial services. the result has been dramatically diminish the opportunities to build wealth or continue to own our home or even to buy a car. four years ago i testified before the senate banking committee about predatory lending in the refinancing market and racial disparities that exist at that time. predatory lending is unequivocally a major civil-rights issue. study after study conclusively demonstrated predatory lenders target african-americans, latino's and islanders. the elderly and women had such a disproportionate rate that the effect is devastating to not own individuals and families and whole communities. predatory lending stymied attempts at wealth building and ruined people's lives.

sadly, since that time my words of been reinforced by more studies and more tragically have been catastrophic consequences for families, neighborhoods and whole communities have the foreclosure rate has disproportionately skyrocketed. in almost every other facet of financial services like racial and ethnic minorities targeted by unscrupulous lenders and we continue to be treated unfairly. my written testimony give you two more examples of this. for the sake of brevity i will not elaborate on them here and now. i could go on and on with examples and studies which demonstrate the undeniable racial and ethnic minority -- in a world of financial services. as a result, americans are faced with dramatically diminished opportunities to fulfill the american dream and to build any sort of wealth for the future. it is because of this disparity in treatment and blatant

targeting of ethnic communities by exploitive financial services that the naacp joined many other organizations among others in the creation of the c f p b under the dodd frank x.. many civil-rights organizations including the naacp testified before this very committee on the need for a single, robust, independent agency charged with protecting consumers and insuring all americans have the same access to credit. ended the old system and five federal agencies played a role in monitoring how financial institutions comply with civil rights law by three federal agencies provide additional enforcement authority. there was not a single entity charged with insuring that all consumers were treated equally and fairly. under the new and improved system as mandated by dodd frank, many financial

institutions will now be the sole focus of a single agency. once fully operational the cmb will have broad authority to supervise a wide variety of financial institutions and enforce fair lending and consumer protection law. most important, fair lending is explicitly built into the mission, structure and research mandates. dodd frank clearly stated that it is attacked with the responsibility to and i quote from the act seek to implement and where applicable enforce federal consumer financial protection law consistently for the purpose of insuring all consumers have access to market consumer financial products and services and market consumer financial products services are fairly personal transparent and competitive. in short a robust function c spv will work through rulemaking, enforcement to ensure a more

fair and equitable playing field. the naacp is pleased to note that the cftc will look at every aspect of financial service including mortgage lending, credit card, and payday loans. i recognize four pieces of legislation and -- contended after the committee contends to strengthen the cftc be. i am interested in the analysis because i would like to say unequivocally that the naacp opposes any move which may weaken or undermine the cfpb. anything that would weaken the mission would mean fewer protection for american consumers in general and ethnic minorities in particular. and confusing world of finance, mortgages and credit emasculating the cfpb would return to a system of inadequate

financial supervision that taxpayers and investors, homeowners and other consumers. allow and continue consumers targeting particular groups to once again allow a greater risk to our financial system. >> i would like to begin the questioning with a question for miss smith. we heard reports that the cfpb personnel already been accompanying prudential regulatory staff on examination. the issue for me is the statutory date to begin full implementation of the cfpb is not until july. for institutions safety and soundness and protection of financial data of their clients and customers this could be problematic if you have

personnel accompanying that doesn't have regulatory authority or enforcement of 40. do you have a comment on that and are you aware this is occurring? >> i am aware. we call it the ride along examination. that would be detrimental in my opinion to any credit union regardless of size. resources of a credit union really need to be better served than doing double examination. for that reason i feel that it would be a problem and i can speak to myself and what i experienced. when tower credit union is examined once aour credit union examined once a year have to

have a year end audit examination. both take approximately 30 days to complete and it takes a lot of resources away from my credit union. resources that i could use to better served by members. that needs to be our focus. that has been a credit union's focus all along. smaller credit unions are supposed to be exempt from this bill as it is written in the testimony. we feel that this would be very problematic to the credit union industry as a whole. >> i think it presents a problem whether it is a ride along or begins issues of privacy issues with financial data and other issues of that magnitude and i appreciate the statement you made that when you get into the

regulatory burden you are really undermining what mr. sheldon addressed in his statement which is how you get consumer products and credit to the folks who most desperately need it and have been shut out in previous from greater access to credit. >> keep in mind in the last three years i have been able to link to a member. when this financial crisis hit we were lending every day. >> i would like to ask miss anderson. the carved out for community banks. you have 22 employees. i can see from your statement and great concern to me as well. the carved out doesn't exist for a bank being an institution of any size with the you are in a larger part that may be falling to the cfpb. the rules and regulations will

influence your institutions. you talk about the resources. hire somebody in to meet the demand for resources, hand in the community to address that issue. >> we have hired outside counsel to look at the issues to be prepared. that has taken additional resources. we don't have any one person in charge being a small institution, everyone has to wear a compliance at to serve our customers and the more time and effort expended on new regulations we already have a boat load more regulations on top of what we have already got takes time away from our consumers and customers and the ability to be active in our

community. >> as opposed to an individual, this makes good common sense. we passed it in the house when it was passed in the house and it was as mr. shark mentioned, was added on at the end, >> reporter: towards the end of the completion of the bill. i think we have seen now with no statutory person in place, no presidential appointment and this point to goes through the confirmation procedure it is problematic if we have no director which is the point of one of my pieces of legislation. i think we could solve this easier if instead of a singular person to have all the power concentrated in that one person if we spread over the commission. my time is up and i ask the ranking members she would like

to begin questioning. >> i would like to thank the panelist for their thoughtful presentation. i would like to clarify for the record the bill started with the director and became a commission two years before the designated day to. the house rejected an amendment that would restructure into a commission. unlike to place the record the debate that is very expensive around supporting the need for a strong consumer protection regulator. without objection i will place that in the record. this is the model we have in government for regulators. the head of the fed, all of them have a single regulator.

i would like to respond to concern about the shadow banking system and that is what we pull into to be reviewed. if of a commission would lead to gridlock, the commission would make it more difficult to react to the regulatory disparity between banks, credit unions and competitors. the credit unions and banks would not cause the problem. that would be unregulated areas. i would like to say my colleague on the other side wants to reduce the size of government yet they want to change a senior director bureau into a five member commission. president obama having difficulty finding a director he can get performed by the senate. one senator can hold up the confirmation. if you have five you would have more difficulty in moving

forward. my question i would like to begin with, mr. sheldon, use a predatory lending was in your opinion a civil-rights issue. it is believed by many that the old system reacted too slowly during the sub prime mortgage bom end that helped bring the economy to near collapse which is why from cfpb was included in the overall dodd frank financial reform. too often consumer concerns were not thought about. as a second fraud or a third thought or not thought about at all and it is believed that if we had an agency like the cfpb they would have reacted more quickly to the screams and cries

to help. with the cfpb help to have prevented that q. we need a system that will prevent financial collapse in the future. so all the way down. >> you are absolutely correct. i am deeply conservative about a lot of arguments being made to forestall the implementation of the cfpb. the naacp has testified before the committee as well as the senate banking committee on numerous occasions. we sat down with a head of currency and the fed and a number of government agencies responsible for this oversight. we did a report in 2007 to show the slow movement of the system and why it is the definition of insanity to continue with

existing policy. we spoke in 2007. the names of high ranking officials out of this for lack of embarrassing them in this particular case. when we said we were pretending in 2007 that african-americans receive some prime loan in 2005 we go into foreclosure by the end of 2009. we were underestimating the devastation created by this lack of oversight and regulatory oversight of financial service programs. more than 52% of some prime lenders for african-americans went into foreclosure by 2009. that is outrageous. we need to process a system that provides the protection consumers need. every step of the way we need to -- what do you intend on doing? a moratorium on foreclosures. we will allow the market to work out. we have no plans whatsoever even though we see the concerns you

are having our two years down the line. we need an effective process for that oversight and enforcement to protect the consumers first. if you protect consumers we will not have the meltdown we experienced. >> my time expired. we would like to request everyone place in writing their response on whether or not the cfpb would have helped present and protect consumers during the sub prime crisis. comparing that to what happened with the old system. thank you very much and i yield back. >> in terms of growing government i remind committee that the cfpb will have a thousand employees. the large growth in government coming from the manning agencies but many still remaining in their original agencies and cfpb -- the ntsb announced they will create a new compliance division growing government further. >> it is exactly backwards.

the bifurcated regulation we have here with the cfpb is exactly like the bifurcated regulation that we had with respect to the gmcs. if congress coming in and muzzling of the market, basically saying that you could overleverage and you have the safety and soundness of prudential regulators saying that is a mistake. 101-1 leverage with jobs like countrywide and holding that on the books you do that so that everyone can own a house with her they can make a payment or not? you will put that leverage into the system? weak muscles those bowls to create a market for junk like countrywide out there? that is the insanity of duplicating that kind of system and trumping the prudential regulator yet again who wanted to regulate systemic risks donor we have created in the last

question, we created a situation where we made it harder, even harder for the prudential regulators to have the kind of say over safety and soundness they should have had. what we have done is they can all eat bring the cfpb regulations of two thirds of its membership which includes the cfpb director concludes the regulation or provision would put the safety and soundness of the united states banking system or the stability of the financial system of the united states at risk. do you think this standard is too fraud and the number of votes needed to overturn too high to effectively protect the financial system from onerous and overreaching activism by the cfpb? >> the chamber believe the bar is too high.

it seems congress recognizes the potential for a problem. do you think this provision is in the bill? the way it was set up it is a bar that is not clear would ever -- that any rule could ever clear. even if you have all five prudential regulators, five of ten members make a decision that a rule could undermine safety and soundness that is not enough. you have to convince everybody else. if this is the safety and soundness question it seems unanimity among safety and soundness regulators, the amount should control. >> this is the aspect that concerns me. i talked to the prudential regulators and heard their concerns during the markup of this bill and during the conference on this legislation. how would you improve upon this language if you might make some suggestions? >> the language -- >> how would you address this

issue? in the way mr. guffey addresses it? >> the only addition -- the only thing i would say in addition to what is before us in the legislation is the authority to review and override cfpb action as i understand it only applies to regulation. we heard from professor warren that her inclination at this point and she is not the director but at this point speaking on behalf of the bureau is not to regulate through regulation or use enforcement actions to push for compliance. that is fine and one way of doing things that wouldn't be the first time an agency did that. if that is the primary means of pushing for compliance and shaping the landscape those actions should be -- at least some of those actions could be sweeping enough to have safety and soundness implications. it is a good idea to review

those as well. >> i will ask mr. wilcox, in your testimony, you expressed support to strengthen the review and you mentioned that the i c b a proposed language to take this a step further by allowing the fslic to3 a step further by allowing the fslic to veto a bill that would adversely impact a subset of the industry in a disproportionate way. if you want to elaborate on your concerns. mr. wilcox is not on this panel so i will ask that question of miss anderson. >> i cannot speak on behalf of the independent community bankers so i am not sure how to answer your question. >> in that case my time is expired and i will yield back.

>> i would like to recognize miss mccarthy. >> thank you for having this hearing and i find it interesting. i keep seeing every weekly numbers in foreclosures. i keep seeing the numbers of people losing their homes many of them becoming homeless. when we had these hearings going back when we were working to see what we could do to protect consumers and the future and here is something we have in place that hasn't gone into place yet. i know there were concerns with the credit unions and some of the banks but we also know that elizabeth warren stated in her testimony in march and a few times before that that the cfpb must consider the impact of prforecosed rules on community banks and smaller credit unions as well as consult with federal

banking regulators considered written objections indisederedug the consuniting process. we are forgetting why we are putting this together. everybody forgot about the consumer. everybody can blame everybody else but nobody was there to protect the consumer. heo one. there are specific questions for everybody. there are specific requirements that the cfpb must adhere in carrying out their regulatory activities. shouldn't congress allow the cfpb to become implemented before we start making changes? we have done this before as we goeredown the road. hemasically everyone pa house for a technical changes. then there was the commission's structure in place. what would have happened if there was an agreement on how to respond to a consumer threat?

orove forward on a proposed rul. with and the consumer the disadvantaged from the gridlocfo >> ? that is what we are trying to prevent? it takes forever to get something done. in the case of what happened for consumers across this nation, they are the ones that paid. they are the ones that paid. they paid by losing thhyr homes. they paid by losing their jobs. what are we doing for them? in my opinion we did something for them and we are doing nothing now. >> rti. sheldon, why don't you start? >> i am in full agreement that toeredelay the implementation o these long needed protections of the american consumer is something we have to remember throughout this process. the cfpb has an forecportunity

be implemented and become fully opeindtional. the naacp sent a letter to the president asking for a nominee to serve as director. that is extremely important. this brings terms of insanitbac the revisionist history we continue to hear about why it is important to put this program in place is something we must look at. we had pn fple offered prodhnts that could not sustain. the issues twofolnes when is sustain witility of ares to credit and protect consumers from the predatory nature of these financial services. to make sure both of those are in place, we see this and will be dated and discussed and legislated and the president signed into law to implement this program and let the american pn fple enhyry the protection of bureau offers.

>> anyone else? >> thank you very rcfpb . we appreciate elizabeth warren's statement and urged congress to make sure the concerns of small institutions like credit unions are taken into aredount. as the cfpb goes forward. compliance burden -- compliant with the inevitable. credit unions have a board regulator and we are not because of the problem. so a board can work. if i can give you a personal testimony with what i experienced the predatory lenders wereeredoing 40 year mortgages, my examiner before

the regulation got out and they were calling us on the phone and saying don't do it. i just had another ecedmple las weekend. it doesn't have to do with lending. our members to complain, i had one member that complained about a $son withdindwal taiom an atmd sheeredid not get the money. she wrote a letter and before i got the letter from and see yot a i have resolved it but then i had to turn around and respond to them in less than a week's time. theyeredo a good hyrb keeping uo the right track. >> i agree with the credit union and comrcnity bapers. we are trying to do whatever we could as during the regulation part to protect them because they did nothing wrong. hemut at times everybod

them and that is why we want to make sure it is right for those who had nothing to do with the economic failure. >> i would like to recognize rt. raysee for questioning. >> i think you fortissimo day. something consistent with all of you is you all support an effective consumer protection. you sonesd it in dinizerent way that you all said that. ory question comeseredown to al four of you. the four pieces of legislation we are talking about, when you tell me how that weakens the ability -- i want to re anyone can tell me how any of

these pieces of legislation if we can the witilitbac >> i don't think they do weakened consumer protection. ãtronsumers and small businesse are the lifeblood of traditional hemanks. we take care of them. if we don't take care of them we don't suit aivink what these fpb anges willeredo expand our ability to take care of our makstomers. a commission is far better than having one person have the plithority overeredeciding what products i should be delivering to my makstomers in bennington, heebindska. i have a hard time believing one single person understands the need for my community. >> i understand you guys have all indicated your thoughmust o how these held. i want to know if you can tell ore where it is weakenenes

>> it slows the process. one thing we eboaerienced, not being able to respond quickly enough to address what was created by many predatory lending packages, if you end up with items to be made, having an oversight along those lines and not allsteing one person to pre cide the leadership in this to also understand checks and hemalances witid none p slow the necessary oversight and enforcement the agency must be responsint.e for. when you look at this legislation, we will sow tionid the process and not add value to the process of oversight and protection. >> if it gets it right we are in the right place as ow ng as it protect. >> what we are seeing so far does not establish that.

>> when it comes to credit unions and a number of credit unions in my district, credit unionseredo provide service fla -- services to credit unions and orouseholds. do you see a director -- one of my concerns about having one director whoereddatsn't like crt unions or the way credit unions are gointhere it may anizect the ability to serve low and moderate income ebmilies. >> absdhutel-- s in asking your first question we do thip it would strengthen. we are in favor of it. in answer to your second question, could you repeat it again? >> if you had a director, one of the pront.ems with a sinhavie director is they may say credit unionseredon't provide service. s and concern is tht thi provid service to lower income

families. theoryhis stion was if you saw director taking this agency in a ightirection that would hur credit unions could you survive -- >> it would put aeredamper on t services i could provide. i am very concerned. ieredon't feel that one persony i am in favor of five. i thip you have a broader array. there would be some confusion to having an examination, aeredual ecedmination. there would be confusion at my hemoaomm of directors l, management, who we reported to.

>> you talk witout consumer protection. >> it is impeindtive that we hae ãtrommonat megulations. we can't have a different relenlation in one state over another becplise most all of us do business in more than one state. i am ow cated relatively close o ottawa. i have farmers ieredo business with that own land in both states. we have customers withs. homes in florida. we need to have one common relenlatorywn uide so we odnderstand the rules of the rod clear across the countr-- s >> i yield b witok. >> mr. miller for five minutes. >> critics of the occ thip that it has been the most captured of

the regulators, most permissive of theoaegulators witid n permissiveness to the banks their regulated conplisibuted t the financial crisis of a few years ago. just two years ago and a b6 part of that was the assertion of preemption that banks subject to the occoaegulated by the fy would not be regulated to state law so they follste what iswn hg on under their eyes. try to pass laws prohibited and the fy cl kept them from tawply their laws. that contributed in particular withoaespect to mort exges and predatory lead -- the failure of states to act conplisreluted toe sub prime crisis and the financial crisis. should the oy clwhat assertion pre-emption be subject to review and if not, why not?

>> i am not here to testify about the occ. >> it is obviously paindllel. why not the same rule? >> if affects safety and soundness wcredit should it beyd >> tht thi are not a s seety or soundness regulator. that is wcredit the concern is greater because the safety and soundness -- >> what witout su fiect to thep a? medicine, and period for assertion of prbe remption? that will be subjected -- why should they not be subject? >> ieredon't have awn in d ans but i will provide one if you prefer. >> the statute as initially proposed by the obama

administration would provide plain vanilla pron bucts onizer side by side. it was awful to think that tht would be requre ed to sell something they don't want to sell and the tplyth was consume efforts didn't love it much either so it got dropped quickl-- s they don't require any given process. they doutedtoaeq? forbid practices that were abusive to consumers or ighteceptive or unebre . it does not require them to do somethin-- wgoon b for consumer. it is clear that cfpb has no authority to set interest rates. you can price products hsteever you want to. you can price them accoomminhavs can youwn ive me an eceds the l

consumer practice you have to do that you are afrvid or6 obv forbid as deceptive or unfair to stay in business? >> i have to sepge my communit-s and have two years of cracker internal or cannot of secondary markets. we develop a program of financial education and a long

program for them to purchase a house. >> leaving aside the unlikelihood that the cfpb would prevent that, do you have to do that standard? >> i have to serve my community to stay in business and serve the needs in my community but i don't believe one person in washington can understand the needs of my community and the services i need to provide. >> give me an example of a consumer practice that the cfpb might strike down as abusive and say you can't do that but the financial institution would have to do that to stay in business. >> i can't give you an instance of a particular product. the uncertainty is what is so concerning. we don't know what abusive means or what is unfair or deceptive or abusive as an escalation. if you can fully disclose the characteristics of a product

these are the things that it is a term without definition or what is given in the statute. we don't know what it means. >> the gentleman's time is expired. mr. mchenry. >> to ms. anderson and smith. with the passage of dodd frank, with the cfpb to additional regulatory burdens, adding to the cost of compliance. >> if i could speak first. two years ago because of the unemployment rate i was able to hire an attorney or a lawyer who got out of law school. i started her off at a salary of 40,000 and had her do policies but two years later she is my

compliance officer and that takes a lot of her time because 90% of her time just doing compliance for the credit union. what has happened and i can speak from the heart. i don't know how long i will keep her because compliance is becoming such -- compliance is becoming of such great importance to the credit union industry and financial institution industry that i can't compete with the larger credit unions. i do need to -- financial costs i had to incur an. because the credit card change and the real-estate changes i had to spend $10,000 in the last few years to update forms. >> how large is your credit union? >> $80 million. >> ms. anderson? >> i had significant increased costs just over the has few

years. those regulations are not in place. we see them coming and we know the costs will be there and be a lot more expensive. we need to figure out how to pay for them. we are raise $60 million bank. >> the you think thesea $60 mil. >> the you think these regulations to both of you will affect smaller -- cost basis per dollar you having your institution as propose to large institutions? >> yes. when i came into the credit union 20 years ago there were 12,000 credit unions and now there are roughly under 8,000. and we will see that number go down and i am concerned about the credit union industry's

survival because we have always been the lender of last resort and i can speak to that personally. >> thank you. >> i agree completely. we don't have one person in charge of compliance. we may be having to move that way hiring an additional person or take more time from my community. >> how many employees do you have? >> 22. >> you are talking about adding a full-time compliance person with what you see coming down the road. >> yes. i have 17 and that includes one compliance person. >> if i could ask a yes or no question here. do these regulations increase access to credit and reduce costs of credit? yes or no? >> no. i would say no. >> mr. sharp? >> i would agree.

no. >> mr. shelton? >> i would say yes. >> how so? >> we have two market participants that say no. >> i am sorry. what i am hearing is an argument about having to comply with these regulations. someone who is responsible for regulations provide protection of the american people and me and frankly what we saw under the last regulation -- >> to reclaim my time, this idea of lack of regulation is absolutely absurd. these financial institutions -- did you lack regulations five years ago? >> >> interesting. [talking over each other] >> the argument here is somehow there were no regulations. ms. anderson, did you cause a crisis that we just faced? >> no.

>> interesting. >> you are a regulated entity. how many regulators do you have? >> i am regulated by the state of nebraska and the federal reserve. >> in addition to what you see coming down the line in washington you will see further regulations. thank you for your testimony. appreciate you making a point that drives up the cost of lending and reduce access to credit. >> time is expired. mr scott for five minutes for questioning. >> let me start with you, ms. anderson and ms. smith. could you give me some examples of how the consumer financial protection bureau and its function will dry up access to credit?

this is a major concern that many of you in the financial service industry have raised that if we do this it will dry up credit. could you tell us how? >> i believe that it will stifle innovation and it will make banks concerned about how they are going to deal with their consumers going forward. that will dry up credit. >> i will have to put more resources into compliance and if you are 17 employees strong, lending could suffer as a result of that. >> but you would agree that there is some question here of a fear of the unknown. there is an uncertainty here.

we do not know. is that a fair assumption? we really need to in order to wade through this in a fairway, fair to the financial service industry to have concrete examples that you could give on how putting forward these protection agents to protect consumer protection would dry up access to credit for the very people we're trying to protect? that is the real core of the issue. >> speaking from experience and granted we don't know exactly what the new bureau will do. speaking from experience i can give you an example. the federal reserve has issued new rules on overdraft protection. those rules require significant

resources from the bank. we have an overdraft protection program to our customers prior to the issuance of new rules. we have discontinued that program so our customers -- we are too small to absorb the costs involved with this rulemaking. customers are paying overdraft fees and paying fees at the merchant. names posted behind the checkout fans. customers are suffering. >> yes, miss smith? >> it is not unknown. is a known. but cfpb has said credit cards and mortgages are two areas

where the credit union has had to dedicate significant resources the past two years. my concern is it is working. we made one revision to the mortgages and credit cards in the last two years. to have it redone does not in my opinion -- >> when we are working on this bill we went through this entire process. but i would like to get a word in. to have some concern about this commission because as you know i represent atlanta and georgia and we have had a series of

problems in terms of predatory lending. i could understand that. these were very abusive practices, fleet finance. the very nature of the reason we got so deep into this problem in the downturn of the economy and what happened in the housing bubble falling is we could not act to correct these situations quickly enough. my fear is that a commission would lead the tears that, would had to be slowingdeter that, wod to be slowing down of the process. we need to work on this.

>> i like to recognize mr. pierce for questioning. >> in the previous questions the question was do you know of anything for would dry up credit to real people? i heard you talking about the burmese. don't they qualify as real people? >> i certainly think so. >> wouldn't the rules dry up credit to those real people? >> they absolutely would. >> do you charge different rates of interest to any of your consumers? say you have 350 people with 30 year mortgages and maybe they don't lend money but you have different interest rates for any of your customers? >> we do not. >> everybody gets one interest rate. >> everybody gets one interest rate on a mortgage loan.

we offer a second mortgage loan. >> i have not paid bills in the past and give more credit. you don't at this a little bit? >> it is an unsecured automobile. it is risk rated. >> some people pay a little higher. mr. sheldon. in your testimony, you want the same access to credit. is this than what you are saying? people are going to run battle lines during different amounts of mortgage payments and amounts of interest rate. those that qualify as access to credit? >> certainly. as we are talking about interest rates we know there are aspects of the market that are high risk and we understand -- >> you basically don't disagree with the idea that risk should be related. just when they are kicking people out of the community and targeting them with fast talk and fancy products, your

objection is not to the market which differentiate between people who are bad risks, that is the question. [talking over each other] >> you don't mind them paying more interest. that is not in your objection. [talking over each other] >> that is fine. what i would like to concentrate on was my friend from north carolina. begin to change the concept about what the cfpb is going to do and that is where the great alarm is. you notice that most people in the testimony in the hearing statements here say is that the idea of the cfpb is to protect the american people, to protect the consumer and yet we suddenly ease the argument over to do you have to do this to stay in business? that is significantly different from protecting the consumer but i think mr. miller is giving us a heads aware this is really

going. do you really need that to stay in business? if you can't answer to the affirmative i think you will be disavowed from creating those products that really do deal with your community like ms. anderson suggested. we have a very unusual circumstance that will never come to the attention of a federal regulator. there are 50 states, hundreds of thousands of communities and the chances of them looking at this are not great. we will only consider what you have to do to stay in business. we are not going to approve it. we see that in the federal government. they don't give approvals that are required. we are giving jobs off of the coast of louisiana. why not give permits that require them? ..

>> what's going to happen is that a product is not going to be approved because it maybe can't differentiate between whether or not it's race-based or not. the product is simply going to be disallowed, and the people who desperately need access to that credit are not going to have it. i will see that circumstance arising. mr. shell done, you have a comment, go ahead. >> i think the real issue here is whether it's an abusive product. i know the term abuse i become withs problematic. however, we're talking about that products have exploding arms, people trying to be charged an interest rate at another name at rates of 450%

and higher. indeed, we're talking about an oversight that provides some protection of american consumers from the kind of predatory nature of many of these products that we're trying to prevent. >> yeah, i understand that. it's just that we do have regulatory agencies that were supposed to be doing that -- >> but they didn't. >> they did not do it. >> that's right. >> this next regulatory agency -- >> let me just say -- >> my time is gone. you'll have to talk to the chairman now. thanks. >> mr. carney for five minutes for questioning. >> thank you, madam chairwoman. i would like to pick up on this discussion about the effect of putting together the bureau here on your bank practices and in particular testimony that you gave earlier that the dodd-frank bill itself would impose new hurdles and difficult conditions in the operations of your facilities. i'd like to know if you could be more specific about that.

i'm not as concerned about, you know, one directer, five-person board, you know, all that kind of stuff in setting up this regulatory agency. i'm more concerned about some of the testimony you gave about provisions that would -- and if you could be specific. everybody agrees that there ought to be consumer protections, sounds like at least that's what everybody prefaced their remarks with. we're very concerned about some of the predatory and abusive practices that we know occur in the marketplace. so two things really caught my attention. one was the reference to specific things in dodd-frank that are new requirements that would impact your businesses and the second was gaps that exist for non-bank lenders. and if you could either, ms. smith or ms. andersen, just detail those things for me, please. >> the legislation looks like we're going to have about 252 new regulations, roughly by

estimates 5,000 new pages of regulations to deal with. again, i've got 2 employees -- 22 employees. that's a lot of pages of regulations for us to understand, implement and comply with. spsks, i -- specifics, i can get you, i'm happy to get you that answer later, but i do have -- >> if there are specifics beyond just the fear of the unknown which we've talked about, if there are some specifics, i'd like to know those. >> well -- >> some of the specifics aren't known because there's still rulemaking going on, but -- >> requiring the registration at the sec of municipal advisers is one of those potential issues. i think the final, the final rules aren't written on that yet, but the way it looks at the moment anybody who has any contact with municipalities, so it could be a teller. the town clerk comes in to my

bank and has money to deposit, and the teller says, you know, if you put it over many this account -- in this account, you might earn a little more interest than you would in this account would qualify as a municipal adviser, and that person would need to be registered with the sec. anybody who serves on those boards and they're not elected and they're providing advice, and in small communities the people who provide financial advice to the schools schools ae foundations are very often the bankers. and the banker would have to then be registered with the sec. >> anything else? >> that's the one that comes to mind right now. i can get others for you. and the second part of your question on regulating -- >> i mean, that doesn't sound very onerous, it just sounds kind of ridiculous. >> well, it's onerous to have yet another regulator involved.

that means the sec c can come into my bank and regulate me. the annual fees are excessive. it's just one more layer of regulation. >> thank you. >> one regulation comes into mind is the interchange price fee cap. i think that my credit union will definitely be devastated by the loss of the revenue from the fed's proposed debit interchange fee rule. although we fall under the so-called exemptions because we are a lot less than ten billion, i believe that forces as a result of this provision will drive -- >> if i could cut you out -- off because i'm running out of time. we've had a lengthy discussion about -- >> okay. we can send more information to you at a later date. >> i appreciate itment. >> you're welcome. >> mr. sheldon, appreciate the concerns that you've talked about, and i share those concerns, and i'm just bond

orerring the balance -- wondering the balance here that we're trying to strike between appropriate regulation and addressing abuse of practice, the predatory lending that concerns you and your organization. >> well, certainly through the thorough investigation done by this committee, by the full committee, by the senate banking committee on the challenges and the problems of what the lack of regulation should prompt us and make sure these new regulations are put in place. again, we're trying to avoid the insanity issue here. we need to do things differently because what we did before did not work. what we're seeing here it's clear it will improve the process and, hopefully, access to capital -- >> thank you, we're out of time. >> thank you. >> thank you. mr. westmoreland for five minutes. >> thank you, madam chair. mr. sheldon, in your testimony you quoted a spring of 2000

article that suggested that i believe it says you asked the gentleman who wrote the article if credit scoring was resulted in higher reject rates for certain racial and ethnic minorities than for whites, and his response was simply, yes. are you saying that the credit bureaus are being unfair to, because of race and ethnicity or are you saying that banks are, have -- and credit unions have different scores for different categories of people? >> no, actually what i was referring to was the companies that actually do this credit scoring process. the ficos and other organizations along those lines have pretty much what we call a black box. that black box takes into consideration certain issues and concerns about the person who was applying for credit and

assigns accordingly. however there was some racial and ethnic disparities in how they come to those scoring, and they won't tell us exactly what that is. in essence, you put in the hands of so many americans a process which is considered proprietary. that is to say they argue that they don't have to tell us exactly how they come to the score because that would otherwise effect their business. that's what we were talking about. >> so you're not saying that ms. andersen or ms. smith or any of those are taking somebody that's both got a 650 and rejecting them based on their race or ethnicity rather than the credit score? >> what we saw was a different standard being applied for racial and ethnic minorities and for white americans. quite frankly, those in the same income class at the same risk factors, those at the same level property and so forth and same level of education were actually being steered into subprime loans if you were african-american or other side a

person of color. then they were actually eligible for a prime loan. that's what we were talking about at that point. >> with the same credit score. >> in some cases with the same credit score as well. >> ms. smith? is that true? >> that is not. at my credit union, it is not true. >> ms. andersen, is that true? >> no, that's not true at my bank either. >> i could offer for the record a full copy of the report with the analysis. >> sure. well, 2000, you know, i don't really want to see a report -- >> it's been updated. >> okay. um, the -- do you think that cf cfpb is going to help get everybody equal credit scores? is that -- >> it will help make sure that everyone is scored fairly, and that is the issue here, making sure the same issues are taken into consideration and prevent the kind of, the kind of

misdirection of those that should have gotten better interest rates, fees and so forth. >> yeah. do you have some specifics of the accusations that you're making against some of the credit scoring folks? >> we do. >> okay. i'd like to see that too. >> we'll send them to you. >> the next thing you mention inside the next paragraph, actually, is you're talking about that even after the fair housing act, after the equal credit opportunity act, after the mortgage disclosure act, after the community reinvestment act that racial and ethnic minorities are still treated disproportionately in the world of financial services. so you think the cfpb or dodd-frank is going to straighten that out? >> it is certain hi our hope. >> okay. could you give me an example of what it would take for them to

do to straighten it out? >> it is, clearly, the increase of oversight. what we experienced before, again, was we were convinced that the chief regulatory -- >> what type of oversight? is i mean, are they going to be doing -- because i know to get a certain loan now you have to do consumer financing, education and, you know, how to buy a house. so i want a specific from you about how this is going to help. >> well, it should -- >> other than oversight. >> it should outlaw exploding arms. we knew there were americans who were being sent into financial packages they couldn't sustain. anytime you have a product that would give you a more began that you couldn't support in the first place but at the introductory rate. what we had was being given mortgages at 4% for the first two years, increasing that by 2% or every year for the next five years and then dropping the escrow so people couldn't afford to -- >> i was in the construction his, but that's not because

somebody is, their ethnicity or anything else. they made those stupid loans to a lot of people. >> targeted -- >> a lot of that -- >> gentleman's time has expired. >> anyway, i appreciate all of you being here, and i yield back. >> thank you. mr. green for five minutes. >> thank you, madam chair. and thank you for the unanimous consent that i might participate. i think that we should talk about legitimate concerns. i believe that the interchange fee is a legitimate concern. i think we have to do something about it. i think that flexibility with products is a legitimate concern. of we'll have to do something about itment i believe that -- about it. i believe that personnel issues for small lenders, this is a

legitimate concern. we have to do something about itment but there are -- about it. but there are also other legitimate concerns that we have to do something about. 327s, three years of a teaser rate ha you qualify for -- that you qualify for, the adjusted rate that you do not qualify for or 27 years of a rate that might move up or down. 228, same thing, a little bit more onerous. yield spread premium, qualify for a prime rate, given a rate higher than the prime rate, never or told that you qualify for the prime rate. pushed into the subprime market. we need to do something about it. teaser rates that coincide with prepayment penalties.

legitimate issues. we need to do something about them. naked shorts. don't mean to sound x-rated. [laughter] but for those of you who are, understand these things, people playing the market and not having the ability to cover. credit default swaps, in an invidious way, there are some ways to have credit default swaps that are meaningful, but when you take it to the level of what we used to call participating in the numbers racket where a number runner -- many of you don't know about this, i'm a little bit older than most of you -- but we used to have these guys who would come through the neighborhood, they would sell something called numbers. and the number runner if he had a big hit on one number meaning a lot of people bought that number, he would go to a fellow bookie and say, listen, i've got

a big run on number seven this week. give me $10,000, i'll give you $10,000, and if number seven hits, you split the loss with me. if it doesn't hit, you keep the $10,000. they literally found a way to legitimize that kind of behavior in an invidious way. we have to do something about it. so we have all of these issues that legitimate, and we have to do something about them. and because time is of the essence, i will ask but one question. perhaps a follow up, but one question. are any of you contending that we need to do away with the cfpb? consumer protection financial bureau? are any of you contending we need to end it? mr. shelton, are you contending that we need to do away with it? >> absolutely, sir. >> let the record reflect that he says no. yes, sir?

>> no, sir, we're not. >> okay. ma'am? >> no, sir. >> ma'am? >> no, sir. >> all right. since we are not going to end it, and we all -- and i think most people in this room agree. and, by the way, i plan to work with my friends on the other side, i think they will attest to the fact that even though sometimes it's difficult to do it, we still work together. we try as best as we can. i plan to work with them, plan to work with people who are seated at the table and behind the table to try to get some of these things resolved. and that's really what this is all about, how can we mend it? because as was indicated by the ranking member, i believe, all major legislation faces challenges. the only piece of major legislation that we will ever pass that will not face a challenge that will be perfect is the one that i draft. [laughter] so now, given that i'm not drafting all of this legislation, it will all have to be mended. ask that's the challenge. we have to -- and that's the

challenge. we have to find a way to mend it rather than end it so that all of these legitimate issues can be addressed. madam chair, thank you for the time, and i yield back and beg that i be excused because i'm late for another meeting. thank you. >> thank you. mr. lose meyer for phi minutes. >> thank you, madam chairwoman. you talk about some discussion that professor warren had in some of her documents and writings with regards to her opinion of a commission versus a board, and i think that's what chairman baucus' bill is all about. we're looking to try to go from a single person to a commission here. and in your discussion in a 2007 article you talk about professor warren believes that it probably clearly shows a consumer safety commission as a cost-effective

way to set up an agency. another comment you made in a 2008 law review article that she indicates that a major challenge in establishing a federal regulator like what she's trying to do or they're trying to do is minimizing the risk of capture which means that only one person can have total control over a thing and capture all of what's going on. can you elaborate just a little bit on that since that's really the focus of what this committee should be talking about today? >> certainly. you know, there's a -- for, i don't know, more than 100 years there's been a strong preference for regulatory agencies, particularly independent regulatory agencies that there be bipartisan representation, that there be multimember leadership. it's, and, in fact, i'm glad, actually, that mr. green asked the question on the panel here asking or proposing that the cfpb go away and the answer unanimously was, no, and it's

important. also there were a number of questions about what in particular are we concerned about in the credit markets. unfortunately, the answer for the most part is we don't know. so what's the best way to prevent serious unintended consequences down the road as this new agency begins to put out regulations? and our view the best way to mitigate that at the top, early on here before we begin to create problems, is to establish a structure, a framework, a way of doing business at this new agency that incorporates diversity of views. >> okay, again, it appears that ms. warren in previous positions has agreed that that structure is sound. >> i think that's important from the standpoint that she, quite frankly, is probably the leading candidate, and she agrees with what we're trying to do here today, and i think that's an important point to make. second point i want to make is the other day when she was here i asked her about the cost benefit of the regulations that are proposed by all the different groups as well as

something she was, in her testimony, suggesting she take a look at, the cost benefit of the regulations that she's overseeing. and i asked her the question, i said, okay, give me an example of when the cost is too much for regulation. i never got an answer. um, we've talked about cost quite a bit today with ms. andersen and ms. smith, and i think it's important to know, can you tell me right off the top of your head or just a ballpark figure what the cost of compliance is, and how much has it increased in just the last couple years and how much you anticipate with this new bill, just the percentage of your income? >> well, if i can go first, i do have a full-time employee -- >> okay, so one out of -- >> and so it probably is costing me about $80,000. >> okay. so one out of 17, so you're probably looking at, what, about 6% increase, 6% of your cost increase as a result of compliance? is that fair roughly? >> approximately.

>> is that probably similar to ms. andersen? >> very similar. i'd estimate we have about one and a half people committed. >> okay. i think it's important to understand, congressman mckinney made a great point with regards to the small constitutions like -- institutions like yourselves make it difficult when you have to desperate that much cost -- spread that much cost over all of your income and all the productses that you you have bee you don't have the portfolios that large institutions do. as a result, it makes it difficult for you to continue to be in business, and i think it's important that we understand by increasing these costs, it also increases the danger of you to continue to be viable, especially when you have to look at 5,000 pages of new regulations, may have to hire an attorney to go through it and make sure you're complying with all of it, and i think this is where this all leads to is this game of gotcha with examination forces. they come in with all these new rules and regulations, and i think you, ms. andersen, made the comment about small banks

being endangered, or i think something like that with regards to these compliance costs. and i think this is, you know, this goes back, again, to answering one of the other questions. i think somebody asked earlier with regards to access to credit. i think part of this is not only it hurts in several respects, number one, it's the fear of compliance because if you're going to get fined by not complying with something, i think you will hesitate to make those things, to make those loans and provide those services. and i think just the cost of compliance increases in general will hurt overall access to credit. i'm out of time, thank you, madam chair. >> thank you. gentleman's time has expired. at this time i would like to excuse ms. andersen from the panel. she has a flight, i believe, that she needs to catch. we have a couple more questioners we're going to go through, but i want to thank you for your testimony, and when you need to leave, just go ahead and make your exit. but i wanted to be sure to thank you. >> thank you very much, madam

chairman. >> thank you. >> thank you, madam chair. i actually don't plan to take that much time. i had been in real estate and developing back a number of years ago, my family is still involved in the construction industry. what little there is in michigan these days. unfortunately. but one of the questions that i had was when i was in real estate, i was taught people aren't black, they're not white, they're not red, they're not yellow, their green. they're green. and they're green because can they afford things. and that really, to me, i think, is the crux of this as we're talking about this. we're talking about whether people can afford to purchase the homes that they have. i mean, we want to talk about what has happened in the market. i watched it very, very closely and none, no state's been hit harder than michigan in this. a lot of it, some of it may be

generational. i'm 42, and i think i'm on my fourth house now. mom and dad are in their second house, and they had half of their down payment paid up or saved up when they bought it. natalie and i weren't quite that, that far along. you're all smiling, you're all nodding your head. because it's, i think it's a familiar story. in so many ways we have just sort of overextended ourselves as we've been pursuing what we thought was the american dream. it is the american dream to own your little piece of america. and so often that is in a home. and we've seen that, we've seen that destroyed in many ways because whether it's greed or what we thought was a necessity,

. >> you all believe the consumer financial protection bureau is

something that shouldn't go away. maybe the follow-up question to that is is the structure. because that's what we're talking about here with mr. tough my and others -- duffy and others' proposals here. do you believe that the structure of that particular program or bureau needs to be that one person? now, we've had, we've had the leading contender, mrs. warren, professor warren here. according to news reports this morning coming out of michigan, my former governor granholm is also being, apparently, looked at for that position. having worked with her for six years, she's a wonderful lady, very smart. i want to make sure that we have a bureau on that. whether it's her or whether it's professor warren or somebody else. but i'm curious, can you answer as to whether you believe that somehow the structure of this would be impacted, whether it be a three-person or a five-person

board versus the this one -- versus this one particular person? ms. andersen, i don't know if you'd care to answer that. >> i think that the structure, the restructuring and having a board or commission makes a lot more sense. you're able to have a broader view, broader representation especially assuming that that board, you know, consists of people who have safety ask soundness regulation -- safety and soundness regulation as well as consumer advocacy experience. >> thank you. ms. smith? >> yes, i i agree. we do want to see a five-member board in place. i don't feel that one person should run that organization. >> thank you. mr. sharp? >> we definitely agree. a commission is superior than just having a single directer. >> all right, thank you. mr. shelton, do you care to answer that? >> yes, sir. what we see in this particular case is this person actually has the authority to convene smaller

groups of advisers to address the concerns that are before them. we see no problem with having one directer in this particular case with the authority to help provide support to the initiatives the agency's going to be responsible for implementing. >> do you believe that's superior to have that one person versus having a three-person commission? >> i think that gives you that dexterity, that flexibility to move very quickly. one of the things that's also been very clear to us is these products end up appearing almost as quickly as whack-a-mole. >> gentleman's time has expired. >> appreciate that. madam chair. thanks. >> i think we're edging up towards a vote, so i want to make sure i get the panel in all the questioning, so, mr. duffy? >> thank you. to kind of follow up on that, mr. shelton, would you say with the fdic that sh a