address this recommendation? >> so a good question, senator. it's critically important that there be coordination. the law has provided that there is the financial literacy council and set up the director of the consumer bureau to be the vice chair of it, working with other agencies. but it goes beyond just other agencies. there are a lot of nonprofits. there are a lot of private sector banks and others who offer financial literacy efforts. there's no need for us to reinvent the wheel. when i was a state treasurer in ohio and we worked for financial education in our schools, and we eventually got a law passed that changed it so that every high school student in ohio now has too have personal finance education before they can graduate i think that's a good model for the nation. but there's lots of curriculum. there's lots of material out there, a lot of it is very good material. and if we coordinate with one another, we can -- we can save resources and be more effective and more efficient. that's what i think the financial literacy council is intending to do. and that will be my approach to

it. >> thank you very much. >> mr. chairman, thank you. mr. cordray, thank you for being here with us today. today i want to visit with you about some thoughts i have about your appointment. not necessarily to revisit that, and stir that up, because i think that's going to be happy i think there's going to be litigation that will make that happen. but in my mind, your being here today raises some very fundamental questions about the constitution, about the interrelationship of the president with congress, and ultimately, at the end of the day, the extension of your power in this position.

now, me views on this are not isolated views. let me, if i might, kind of set the stage here with some references to people who have served as united states senators, some who i have great respect for. then-senator barack obama, when a recess appointment came out of the bush administration, referred to recess appointments as the wrong thing to do. we referred to a recess appointee. not necessarily that specific appointee, but a recess appointee as damaged goods. that's his words. and then he referred to the situation the country would find itself in, and he said, quote, we will have less credibility. because that recess appointment. the majority later, minority

later at the time described it as an end run around the senate and the constitution. called it an abuse of power. senator john kerry, again a gentleman that i've worked with, have a lot of respect for, referred to recess appointments as an abuse of power of the presidency. sometimes in this business there's a certain amount of political push and shove that goes on, obviously. i don't think that's what they were talking about here. i think they were talking about genuine issues of constitutional power. now, in your case, if we accept the premise of your validity in this position, then we accept the premise that our ability to offer advice and consent basically disappears.

because the president can determine when we're in recess and when we're not in recess. and just appoint whoever. and then we don't have a constitutional provision for advice and consent of the senate. now i've been through that process. i have a tremendous amount of respect for that process. i think i benefited greatly and i hope the country benefited greatly from me going through that process and seeking a vote in the senate. and i had no idea when i started it whether i would win or lose. now there's even a greater challenge here. we took the opportunity to do some research. and there's not a lot of cases out there, as you might expect, on the issue of what impact does this have on your power. but back in 1989, when congress traded the office of thrift

supervision there was a challenge to the director. and i want to read something from you, judge lambert of the, i think it was the u.s. district court for the district of columbia, found that the company that was raising the challenge and i'm quoting here was subject to regulation only by individuals with legal authority to act. then goes on to say, because the director was not properly appointed, he has no power, he has no power or right to exercise the director's appointment powers than this court does. and then says, olympic has the ability to seek an injunction to restrain to stop the director so not only do we have this constitutional issue, which i think is fundamental to our

power of advice and consent under the constitution. but if you are successfully challenged, would you agree with me that your actions will be invalid during the time that you are in this position? >> senator, i don't know that i believe that's clear-cut one way or the other. it also not clear-cut, by any means, that this is not a valid appointment. i believe it is. i've read the justice department's opinion, which i thought was persuasive. but in any event, i do take your point and your concern. i know that you went through a confirmation process to become a cabinet officer. undoubtedly you appointed numerous people when you were governor who went through confirmation processes. you're very familiar with the process. as you know, i was in this

process, was nominated in july, came up, had a hearing here, met with many of you, was appreciated the opportunity to meet with you, and ultimately went to a vote. so i benefited by months of that experience, and understanding over the course of it the value of hearing from and having input from the senators who took the time to spend time with me and give me their views about my appropriate role. i have been appointed as director. there may be issues about that. i understand people have different points of view about that. but i now have legal obligations. i'm supposed to carry out for this bureau. i am going to do that. we're going to continue to walk straight ahead one step at a time, trying to fulfill our legal responsibilities. and that's -- seems to me the best i can do at this point. >> i've run out of time. but i'll wrap up with this. i can't imagine how anybody could maintain under the circumstances that your appointment and your service is

valid. and i can't imagine then, based upon the precedent that i see, how the actions you're taking will be upheld. and i think that's a very, very serious consequence for our nation. thank you mr. chairman. >> senator brown? >> i just simply can't believe we're still having this debate. the job of richard cordray's job is so important. we know what all kinds of people said. the american financial services association, the trade group for consumer lenders said there's a receptivity to learn, it's very refreshing. the american bankers association said the agency approached the bank oversight was pretty good news. the independent community bankers called the process for refining model mortgage forms refreshing. was clear more to the point was a substantial improvement. the cfpb had its banks ought audited by gao which found its

bank statements were fairly edited. the acting control of the currency not exactly known for its hostility to banks has said last week that some attempts to regulate the opaque over-the-counter derivatives market might be an overreaction. all of these speak to the focus of this agency and the effectiveness of this agency. that we're still having this debate, and let's lay out some facts before people continue here to play this inside baseball game that the country simply doesn't care about, that president obama's overstepped his overreach. first of all, president bush made 171 recess appointments. president clinton made 139 recess appointments. eight years. i understand. president obama's made only 32 recess appointments, and his recess appointments in large part are because a one political party, the other political party has blocked time after time after time even bringing these to a vote. we weren't saying to my colleagues on the other side of

the aisle, vote for rich cordray. we were just saying give him a vote. this is the first time, as i said in this committee and on the floor a number of times, the first time in american history, according to the senate historian, where a political party has blocked a nominee simply because they don't like the agency. so, if their precedents -- if the other side would get their way on this, and that precedent would stand, next time there's a commissioner appointed for the fda are we going to say we're not going to approve him until we weaken food safety laws? is that the way tear going to operate this place? we can't operate this government when one party says we're not going to confirm somebody because we don't like the agency over which he will -- which he will administer or regulate. in the end, we know that the other side was simply doing the bidding of wall street. that's what they've always done. that's what they're doing today. that's what they'll continue to do.

but, this agency has important work to do. you can see already their effectiveness when people from whom you wouldn't expect compliments like that are saying those positive things. let's put that aside and talk about what rich cordray, what the consumer bureau can do, in my subcommittee with skip humphrey testified about what they're doing with seniors to protect seniors, and petraeus has testified about how we protect veterans. that's why these agencies are here, not to score political points, but to protect them against the kind of -- the kind of financial service abuses that too many veterans, too many seniors objected to. in my last minute or so i would like to ask mr. cordray a question. every year i invite college presidents from around ohio, about 55 or 60 of them, two-year, four-year private, public schools to come to washington. we spend a day, day and a half talking about issues that affect them and whether they're graduates fighting jobs, whether it's student loans, whether it's

affordability generally, whether it's training scientists, all the things that our colleges and universities do so well. one of the issues that we addressed most recently is the rising cost and the strain that student loans are putting on middle class kids and working-class kids that graduate from college with far too much debt. that's why i proposed a private loan ombudsman office that was included in the cfpb. mr. cordray tell me what the bureau's done to address the rising level of educational debt in the country. what are your future plans as you begin to run this agency and figure out how to protect students, in these kinds of situations. >> sure. senator, first of all you'll be pleased to know we've hired a terrific individual to serve as that private student lending ombudsman in the agency. we also made student loans one of the focuses of our know before you owe project. we reached out to the department of education, trying to work in partnership with those who are

relevant in the space, and we developed a student aid shopping sheet which is now being promoted around the country. to simplify and clarify about young people and their families, who very often it's the first time they've taken an obligation of this size and magnitude. it's going to be critical to the future of that child, and their opportunities. exactly what they're getting into, exactly what the terms of their loans would be, the repayment terms, the cost, the interest rate and the like, and we are also working to further promote clarity around the repayment terms of student loans. we have a calculator on our website that people can use. young people who often don't appreciate the difference between federal student loans and private student loans to understand the difference in terms. to understand the timing of repayment. and we're going to look for more opportunities to try to positively affect this marketplace. it's too important for young people, you and i both know,

many, many young people who could not get a college education or any higher education. community college, vocational training, if they didn't have help and loans. and they can't get it from their family and they need to understand the choices they're making so that they can make good decisions about their future. and the bureau stands ready to assist and to help this marketplace be clear and transparent for them. >> senator? >> mr. chairman, thank you very much. i had no intention of going down the path of your confirmation process except i can now respond to my colleague from ohio. whether or not mr. cordray was confirmed had no effect upon the consequences of dodd/frank to wall street, and to suggest that, at least i am -- had refused to confirm mr. cordray because of my protection of wall street, i find unfounded, and i can't imagine that there's not a

constitutional issue about what article 2, section 2 of the united states constitution means when it says the president can make appointments when the senate is in recess. so that issue is certainly presents itself, i don't think it presents itself today. it has presented itself or will present itself in court, and i didn't intend to use this hearing as an opportunity to rehash this issue, but i do want to respond to the gentleman from ohio to indicate that i simply disagree with his premise about those of us who found fault, not with mr. cordray, but with the confirmation or the lack of confirmation of the president's appointment. mr. cordray, i did not hear but understand that you responded to chairman johnson about community banking and i appreciate hearing that. i would indicate to you that in my short period of time as united states senator, trying to get a regulatory environment in which community banks can lend

money to credit worthy borrowers has been a cause of mine and it seems to me that the regulatory environment in which they operate is oppressive and uncertain. and so your suggestion about appointing an advisory group of community bankers, of lender to advise you, i certainly don't disagree, would suggest that's valuable, but i would only point out that at every opportunity in which i have had to question witnesses from the otc, the treasury department, the fdic, fave all done the same thing. they have those advisory committees, and yet the -- the growth and regulations continue, and the sense by community bankers that they're not understood still prevails. so don't want to discourage you from doing that, but please at least from my perspective understand that that's probably not sufficient, and will depend upon your attitude and approach. and then in that regard, before you respond, are small lenders,

community banks, credit unions, they need clarity, not only for their own sake, but for in my view the ability to grow the economy. i do think that there is a lot of reluctance on the part of many small business men and women to make decisions because they don't know what next is coming from washington, d.c., what the rules are going to be. and in regard to financial institutions, the phrases that have been around for a long time are pretty well understood. unfair, deceptive. but the legislation that created your position has, to bankers, to us, a new word, called abusive. and my request of you is that before you find something to be an abusive action, by any financial institution, that you take the full steps of defining what the word abusive means beyond whatever, in my view, minor definitions, lack of

substantive definition there is to that word in the dodd/frank legislation, and would ask that you have an opportunity for public comment. i've seen examples in just recent days in which financial regulators have determined a practice that, until that point was never considered to be inappropriate. but then go ahead and criticize a financial institution for that conduct. and so my request of you is to do what due process requires, if nothing else, fairness requires, define what abusive means before you find some practice to be abusive. >> thank you, senator. we will be careful about that. and to return to the issue of community banks and credit unions, i have a track record on this. i was a state and local official in ohio. i've worked with the community banks and credit unions in ohio. they know me well. they have spoken to the fact that they found me to be a pragmatic and listening person.

who was -- cared about and was mindful of their business model and how we could preserve it. the thing that hurt the community banks as much as anything was not so much too much regulation of them as a complete lack of regulation of many of their competitors in the mortgage market who didn't adhere to the same standards. sometimes people would come in asking them for a loan that they knew was irresponsible. they would say no and saw those people go right down the street and get a loan from someone who wasn't licensed or wasn't regulated and could just sell it on to someone else, didn't have to care whether it succeeded. they would be right about the loan but it didn't matter. and they lost market share of those people. so our leveling the playing field between the banks and nonbanks and the mortgage market in particular is very important to protect the community banks and credit unions. beyond that, we will be, as i have said, we will be mindful of burdens we're imposing on them. we will listen closely to what they tell us about the effects on their operations. and we will do our best to take

account of that. but the other thing that hurt the community banks and credit unions as much as anything in our lifetime was the financial meltdown, the credit crunch that toppled a bunch of community banks, callsed many of their loans to default because of the deep recession we suffered. if we could have headed that off by a more sensible approach ten years ago, community banks and credit unions could have thrived. their model to me is the winning model. it is a customer service model. it's a community oriented model. it's one that we want to preserve and encourage and that's my personal background and viewpoint on it. >> mr. cordray, thank you. it is what you point out, is accurate and it is the community bankers who believe that they, in most instances, had nothing to do in causing the problem but yet still are in the bull's-eye for additional regulation. my time has expired. i would only indicate that i'm the ranking republican on the appropriations subcommittee for financial services. where we have responsibility for determining at least initially

the appropriation for the s.e.c., the cftc, ftc, the treasury department. while you're not subject to our subcommittee's jurisdiction, i can't speak for mr. durban, i would indicate to you a desire, a willingness to have conversations with you about the appropriations process through the federal reserve, and your funding, if you're willing to visit with me. >> be glad to visit with you and glad to have our staff come and speak to your staff and make sure you know everything you need to know about what we're doing. >> mr. cordray, thank you. >> thank you. >> senator? >> thank you very much, mr. chairman. i thought i'd focus on this issue of the remittance fee that has come up. it's not addressed in any detail in our report. i assume that's because your report was covering through december 31st, and the july was completed in january. but i just want to say my understanding is when people seek to transfer money internationally, this rule says they need to be told up front

how much money is going to actually arrive. in other words, no hidden fees. you see the full impact of the exchange rate that's being assigned to it. and in addition, if the money doesn't arrive, or was different than what the person was told, there's a way to fix that. is that the essence of this rule? >> it is, senator. if i could say, when you or i, and i venture to say, every one of the people who's sitting in this room, when we write a check or we make a bank transfer, or we use a credit card we're entitled to some basic consumer protections. we expect that, we rely on it and it's appropriate. in this market though for people who send money overseas, typically to loved ones, it's one of the most steadfast, loyal acts i can imagine. people taking the little they have, dividing half of it and sending some back to mothers and fathers left behind, they're entitled to consumer protections, too and that's what this rule embodies. >> well, i think that this kind of rule is very compatible with a competitive market place. that is if i'm seeking to send

money overseas but i can't get a firm estimate of what the fees are going to be, i have no way to compare vendors. and therefore there's no rewards, predatory practices. but with this rule, it rewards the efficient provision of services to the economy. am i correct in that? it empowers the consumer to shop between vendors. >> that's how i see it. that's how the bureau sees it. i believe that's how congress saw it, which is why it required us to adopt a rule of this sort. >> well, i appreciate that you have done so. i hope in your next six-month report we'll see an initial evaluation of the implementation. and if there are ways to make the enforcement more cost effective, more efficient, certainly that will be appropriate. but i was getting some numbers on the cost of a $200 transfer, estimates are that the cost currently range from 3% to 13%. that's a 10% spread. now some of that may be a difference in destinations. but some may be a difference in the embedded exchange rates and

practices of the vendors. certainly within that 10% spread, the quarter that you refer to that is one quarter of one% on a $100 transfer and it may be a lower amount on a larger transfer, since the spread over the cost of enforcement are spread over larger sum. it seems like a small price to pay for creating a competitive marketplace, and any predatory practice and creating fairness, and if somebody just rips you off, you have redress. it seems like a very small price to pay for a fair and competitive marketplace that will produce all kinds of efficiencies, and the loss will offset that fee. >> that's the judgment i understand congress to have made. it seems like a reasonable judgment. of course our job is to carry out the law, regardless. but i do think that's right. and as i said, we are further proposing to see if there's an appropriate threshold we might set for community banks and

credit unions that don't do transactions in the normal course of business. we're going to be considering that over the next several months. >> when you speak of the same burdens are you speaking of kind of the enforcement strategies or are you speaking of providing pricing up front, so would that also disappear? >> that's something we're going to try to consider what an appropriate threshold would be. i think the protections for consumers, the argument there is they should be the same. but if there's very few transactions and there's plenty of other places that consumers can go and we've made it easier for them, as you say, to shop. which is very important in this market. as you say, it's not been a transparent market. it's not been a market that's included shopping, then we may well be able to exempt some of the smallest institutions that don't need to do the same kind of compliance as larger institutions when they're doing very, very few transactions. >> well, i certainly applaud you for this rule, for fairness, for

american consumers the fact that you're studying the rules of the road for an effective, competitive marketplace that is so important in our capitalist system. i do hope in the next six month report we'll see an analysis as you work to continue to make it operate in the most effective manner. i wanted to turn to page 28 in your report, where you mention that you are exploring an issue between the difference between credit scores sold to consumers, and those that are provided to lenders. this is a new issue to me. one i hadn't heard of. can you summarize how this came to light, and what you're exploring. is this appropriate under the law? why is there a distinction? so forth. >> so in the law, which of course, is the authority we have, there were two studies congress asked us to do by last summer. the first one had to do with remittance transfers and to what

extent that information could be used to help create credit reports and credit scores for individuals who might not otherwise have enough date fa to score them accurately. the other one was we were asked to issue a report on the sort of variations that people have seen but don't quite understand among different types of credit scores. so, for example, when you ask for your credit report, and your credit score, you may get one number from the credit reporting firm. and yet when a bank or some financial institution asks for the same data, to sort of judge what interest rate is appropriate to set for you, they may get a different set of data, or it may be affected by the fact that you've made the request that may be taken into account in setting the score. there's just lots of little things that were not well understood that might affect this. >> i'm going to cut you off there because i now recognize i'm over my time. i'll read your report. i'll be interested in understanding that. >> happy to follow up with you or your staff.

>> thank you. >> senator schumer. >> thank you mr. chairman. i want to thank our witness for being here. i'm happy to see he's fulfilling his duties as first director of this historic new bureau. one that i and several members of the committee fought hard for, and will be one of the lasting legacies of dodd/frank with a real chance to directly impact the lives of virtually every person in america. and mr. chairman, i can't help but note the fact that we had a healthy attendance in committee this morning and a healthy debate. with strong views on both sides of the aisle. i heard the comments of my colleague from nebraska. now there was a discussion last week on the other side to consider a boycott of the hearing. and a few members appeared to have followed through on the boycott, and were absent from the hearing. but the plans of a mass protest appear not to have gone over with many members on both sides of the aisle, of course.

you including the other side. and that strikes me as a good thing. but also, an admission that continuing to hold this nomination hostage until we agree to gut the bureau, that we just pass, notwithstanding a few of the comments, for instance, of my colleague from nebraska, means that my colleagues have dialed down some of their opposition on this issue. it's a losing fight politically. for them. many on the other side wisely don't want to continue the fight because they know it's on the wrong side of consumers. and the bottom line is we need an agency to guard the rights of consumers. i learned over my years in trying to simply get credit card disclosure, even though the fed had the best of intentions, they were so busy with so many other things that they never got around to doing it. it took me ten