i know you haven't been there long. i know it is your intention to comply with the letter and the spirit of the law. >> yes, senator. i agree. and let me clear up the record on that. i appreciate the opportunity to do that. >> okay. >> so, as i said, the small business panels, i meant it then and now, they are both required by the law, except in certain instances and they will help us do our work better. with respect to the remittance rule, that was a rule proposed before we became a bureau, we inherited the rule and took it through to completion. in the law, the timing that congress created on small business panels is that this they are to be convened and we are to get their input prior to proposing a rule.

so, for the remittance rule, that time had passed before we gained any authority of that rule. what we did was solicited broad input and we took it into account in proposing the final rule which has been adopted and in further proposing the rule that i mentioned a moment ago which is to set a threshold below where we may find it exempt from small institutions. we intend with our next rule which is the, the consolidation of the forms on the mortgages to convene small business panels and in fact that is under way now, the process for doing that and we will do it as the law requires in every instance, again, not just because the law tells to but because it's a good idea. >> would you look at the possibility to revisit it if you thought it was necessary. other people thought it was necessary that the rule that you just passed regarding remittances. i don't know the details of it,

i just know it's going to cost a lot of money to comply with. >> you know, it's a, i guess, needs to be put in perspective. our understanding is that it will cost, a quarter for every $100 of remittance transfer? >> 25 cents? >> yes. that is a price to pay, but it's a small price to pay considering there were never consumer protections for people that sent money overseas, it was on them to have to take the burden of any errors that were made. these people deserve consumer protections. >> i want to get in the area of safety soundness. the dodd-frank act does not require you as director to to consider the safety and

soundness of institutions when you engage in rule making or enforcement actions. the drafters of dodd-frank were a adamant about this, they said a safety and soundness check on your actions would gut the agency. but you stated, have safety and soundness as our primary concern, we have consumer protection as our primary concern. how do you intend to reconcile your actions at the bureau, where i presume you will give no consideration to the safety and soundness to institutions, with your responsibilities as a board member of the fdic where you must consider the safety and soundness of institutions. it looks to me that it should be a balance. safety and soundness is important but so is consumer protection. you cannot have one without another.

if you don't have safety and soundness, you won't have an institution. >> i agree with that, senator. i think it is a balance. what i said their primary responsibility is safety and soundness and ours is consumer protection we are going to be consulting and coordinating with the other banking agencies at all times, that is why i believe congress put us on the financial stability oversight council to work with them. i agree with you it would be irresponsible to think you can protect consumers while you are killing off institutions that are serving consumers. that does not fit together. >> there's got to be a balance, has it not? >> i agree. >> and you are going to look to find a balance? >> and we will do that by listening to the banking institutions. i serve on the fdic board with them. yes, we will.

>> the area is too big to fail, very important to a lot of us and i hope to you. during the consideration of the dodd-frank act it voted down an amendment which would have limited the size of banks. under the amendment no bank would have been able to hold more than 10% of the deposits. it would ensure that a failure of a single institution would not bring down the entire system. i supported the amendment. do you support limiting the size of banks and if not, what steps are you going to take to make sure that banks are not too big to fail? >> senator, my understanding of our authority at the consumer bureau is that we do not have authority over issues. >> we to not have authority to

limit the size of banks. we don't have the authority to set the rates or the price of financial products. >> you are on the bureau? >> yes. >> but you are on the fsoc. >> i am. >> now that's a consideration of too big to fail. you do have some, by cause of your other placement of where you serve, right? >> yeah. that's fair enough. i would say, just to be honest with you, sir, i don't know that i have enough perspective at this point to assess the pros and cons of that amendment. so. >> well dr. volcker said, if they are too big to fail, maybe they are too big to exist. you have to think about the taxpayer. thank you mr. chairman. >> senator menendez. >> thank you for calling this hearing. in the worst financial crisis in generations, consumers were not protected from the tricks and

traps and federal regulators were often more concerned about the interests of wall street than main street. and we now have an obligation to hold both wall street and non-wall street lenders and providers of financial services accountable for whether they treat consumers fairly and it can be done by laying down clear rules of the road and so that is why i look forward to your work at the agency. let me ask you a couple of specific questions. i want to ask you about prepaid cards, something that i have been pursuing for a while now. a product whose use has exploded in the past few years especially under banked consumers, since credit cards and gift cards and other cars have been regulated, prepaid cards

have been one of the few largely unregulated products in the marketplace and as for the fees consumers pay on them, there's a wide range of undisclosed and i believe in many cases unreasonable fees and they certainly don't come with fdic insurance or protection against theft or loss for the consumer. so, we have introduced legislation that the prepaid card consumer protection act, what progress has the bureau made in moving forward on consumer protections on these cards? >> let me say a couple things in response to that, senator. and we appreciate your particular interest in the subject and the legislation you have introduced to concerns you raised. both disclosures and transparencies on the product and the protections for people have with the deposit on the product with the banking institution.

there are two things at work, number one, prepaid cards are the example of innovation that occurs all the time in the financial markets. in my generation when i was a kid credit cards are new debit cards are now in wide use and prepaid cards are one of the newest products and on the cut edge of finance, more and more people are beginning to use them so we need to make sure there's appropriate protections there. sometimes it takes the regulations to catch up with innovations. it's reflective of the fact that regulation can push usage around in the market. as you said, there's protections and constraints on credit cards and new ones on debit cards that is pushing the market to prepaid cards. so we want to have a level playing field so that products are being chosen based on their

merits. not because there is a difference of regulatory regime. >> we appreciate innovation, and we want that, but when you see a market go from a regulated process to a unregulated process, there's a reason. so is this an area that the bureau will be looking at? >> it is an area that we are looking at, it's an area of concern for the reasons i started. if you legislate on the subject, we will be happy to carry out the laws as you enact then. >> you mentioned about simplified rule making for smaller institutions and i think it's something that is welcome here, can you

tell us how agency will craft regulations and provide guidance that makes it simple and workable for community banks? >> and i'll say two things about the work we are already doing. number one we are trying to be highly inclusive in going about this. it was mentioned earlier that maybe the bureau has given the interpretation that we know best. what we find is we will know better as we hear from others, both the people that operate in these markets, the financial institutions and the consumers. our know before you owe program is around us getting more transparent, the kind of disclosures here. we have inherited a huge amount of rules from other agencies and published a federal notice asking people about how to streamline the rules and cut down burdens that are not

delivering benefit to the consumers and we are in the comment process on that and will have comments back sometime later next month and we will set to work to see what we can do to show people we can streamline rules and be an agency that the mindful on delivering on that. >> one of your mandates is to facilitate innovation through transparence. most adults cannot find $2,000 in an emergency in 30 takes if it needs to. have you looked into how to in weeks ago which was our first beginning look at the market where it is clear that in it country, as you say, there is a clear consumer demand for

short-term, small dollar loans to help people get through crisis, emergencies, when they don't have a stash of money that they can draw on or they don't are a friendly relative who's willing to pony up that money for them. there are a number of products out there. it is a significant problem that is unsolved in this country, i believe. is this demand? we need to fill this demand and spur competition to spur that demand and that's something we're thinking about very carefully. we don't have all the answers on it, frankly. wire trying to figure it out, working with industry and consumers. >> look forward to working with you. thank you, mr. chairman. >> senator croaker. >> thank you, mr. chairman and thanks for the hearing and thank you for coming. especially in light of the circumstances, the last period of time, i appreciate the time you spent with us in our office, on the phone and the

conversations we've had. the title of the hearing is interesting. holding the cfpb accountable. in this role -- am i still here? in this role as set up, who is it exactly that you do report to? >> i would say we're on the same level as every other independent federal level, particularly the banking agencies. in my view we report to congress. you're the ones -- >> but who exactly do you report to? there's no board or anything? who do you report to? >> in my view i report to congress. i was in front of the house oversight at their request. i'm here at your request. i'll be here as often as you want me to or meeting privately so you know exactly what we're doing and you have input into what we're doing.

>> and each year when your agency needs funding and kind of questions, like our chairman asks about being efficient and all of that, who is it you seek those appropriations from each year? >> well, under our -- under our law, which is what gives us authority, congress enacted that we follow, we received funds from the federal reserve. >> no one? >> we're equivalent to all the other banking agencies who don't go through the congressional appropriation process but subject to being brought up here and having you grill us and talk to us about exactly your thoughts about how we're spending money -- >> let me ask you a question. regardless of how people feel about the health care legislation that passed, i don't think there's any question but yet some of the constitutional challenges going to the supreme court have sort of muddied the water, regardless of how you feel about it, states are not sure exactly what they're going to do. have you had conversations,

especially over the last couple of weeks, within the agency, about the fact that there's no question that most of the rule-making that you do, or much of it, will be challenged constitutionally because of of the way things have occurred? have you had any considerations regarding that whatsoever? >> we have had consideration of it. i've been thinking about it. i've been appointed as director. i understand there are concerns people have about that. having been appointed director, though, i have legal responsibilities under the law that you all enacted that i have to carry out. i'm going to do that. i'm going to dot best i can with that. >> i understand that. i appreciate that. i appreciate the way you've answered many of the questions today. but what i think you've said is you had internal conversations with your staff about the fact that as these rules were made, there's no question that there's going to be constitutional

challenges to those, which in many ways instead of creating predictability in the consumer market and predictability in the financial markets, we're going to have challenges, i would predict, many will rise to the level of the highest court in the land. so, it's an interesting place that you find yourself, again, not of your choosing. let me ask you this, moving on to policies. risk brace pricing is something that's been very much a part of our financial system. those people who pay late, pay more, and those who pay on time typically get credit at lesser rates. we had conversations with someone who was going to be potentially in your position prior to moving on to senate races and those kind of things. and it appeared to us that they didn't really believe in risk-based pricing. i'm just wondering if you can clearly state to us, when people

lay late, when they have lesser credit, should they pay more for credit? is that a concept you'll reinforce in the consumer agency? >> senator, i believe that's the way the market works. i mean, when you price a product, have you to take into account costs. one of the costs that you have to take account 6 of is risks of default, risks of loss. they can come from many different sources, not just the fact that someone on the other end of the bargain doesn't follow through, but that certainly is something i think any responsible business may have to take account of in pricing their product. >> i notice that you send out e-mails. i get them regarding -- if i've heard any stories about things that have happened, please share them when somebody's been -- had problems. by the way, i hope we have a consumer leader like yourself that will pursue those kind of things. i think all of us want to ensure that when we have bad actors, and we do, that just happens, we have bad actors from time to time that need to be prosecuted, are you also with equal

vengeance sending out e-mails to people who know of borrowers who committed fraud, who purposely turned in the wrong income statements and those kind of things? are you going to be rooting out that kind of activity also? >> well, we don't ourselves have criminal authority, as you know, but we can make referrals. over the years, when i was attorney general and at the local level, i saw bad conduct by some businesses and i saw bad conduct by some individuals and consumers. and in the real estate market, the flipping and other types of scams and frauds involved, you know, both -- both types of parties. >> so you're going to pursue both with vengeance? i haven't received any of those e-mails yet, by the way, but i look forward to receiving them. i just close with this. you know, both chairman and ranking member brought up issues of cost. i do hope -- i think one of the concerns people have with the

agency and being set up as it was and not being concerned about the football system itself, i do hope you'll pursue the aggregate cost of credit. i spent my life -- i spent my civic life prior to being here focused on issue relating to low income citizens. that's why i'm in the senate today. i think a lot of times when we think we're doing something good, as it relates to credit, what we actually do is limit credit for those less fortunate and have lower incomes. i hope as you look at this, you'll take this into consideration, the aggregate cost of credit, especially those to lower income. i thank you for your service. >> thank you very much. good morning and welcome to the committee. >> thank you. >> for the first time in history, we have an agency with a singular, consolidated mission to provide a voice for the consumers of our country.

to protect consumers from predatory lending practices, that contribute it to the economic crisis from which we are still recovering. and to empower and educate consumers to make informed financial decisions. i'm very pleased to welcome you here to this hearing and i'm confident that you will make the consumer financial protection bureau a strong defender for consumers. so i look forward to working with you. some think eliminating the consumer protection bureau and creating a board instead would improve accountability. in my view, having a signal directory responsible for the

bure bureau's results promotes accountability. effective effectiveness. the accountability office has repeatedly emphasized the importance of focus sustained leadership to tackle complicated challenges. director, can you please discuss how n your view, the bureau will be held accountable to the american people. >> i think we're accountable in a number of ways. i've said there are different bodies and independent agencies that are structured in different ways. some have a board, some have a board and a director, some have a director. examples of each and they all can work well. i do think that in our situation, the law that we are carrying out provides for a single director. that means there's one person,

in this case myself, who sits here. and is responsible to you to answer your questions. and if i can't give you a satisfactory answer, i'm responsible to go back and get that answer and bring it back to you. there's no passing the buck. i'd like to say this, but others might say something else and diffuse responsibility. so there is something to be said for that. the accountability i said before lies from our into row to congress. you pass the laws that give us the only authority we have to do anything. we are responsible to you. for how we carry out those laws. you can bring us here to testify any time. you can have us come to meetings and brief your staff, as many of you have done, and we'll listen closely to you and try to make sure you know exactly what you need to know about the work we're doing and have input into that work. >> director caudry, government

of the federal financial literacy efforts received significant attention last year. however contrary to media's inaccurate reporting, they did not find evidence of overlapping duplication among the 56 programs and did not identify cost savings that would result from consolidating financial literacy programs. according to the gao, this issue was examined by the previous administration which found that each program was targeted to a specific audience such as students or veterans and carried out by an agency with expertise for a given topic. makes coordination essential.

coordinate closely with treasury to clearly define financial literacy roles and activities to make the best use of resources. >> is that a question question, critically important there be coordination. the law has provided there is the financial literacy council called fleck and set up director of consumer bureau to be the vice chair of it, working with other agencies. it goes beyond other agencies. there are a lot of nonprofits, a lot of private sector backs 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 every high school student in ohio now has to have personal finance education before they can graduate, i think that's a good model for

the nation. but there's lots of curriculum, lots of material out there, a lot is very good material. if we coordinate with one another, we can safe resources and be effective and ee fishgt. that's what i think the financial literacy council is intending to do and that will be my approach as vice chair. >> thank you. thank you very much. >> not necessarily to stir that up, because i think there's going to be litigation that will make that happen. but in my mind, you being here

today races fundamental questions about the constitution, about the inner relationship of the president with congress and ultimately at the end of the day, the extend of your power in this position. now, my views on this are not isolated views. let me, if i might, kind of set the stage here with some references to some 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. he referred to a recess appointee, not necessarily that specific appointee, but a recess appointee as damaged goods. that's his words.

they described it as an end run. called it an abuse of power. senator john kerry, again a gentleman i've worked with, referred to recess appointments as an abuse of the 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 president can determine when we're in recess and when we're not in recess and just appoint however. then we don't have a constitutional provision for advice and consent of the senate. i have a tremendous amount of respect for that process. i think i benefitted greatly and i hope the country benefitted greatly from me going through that process and seeking a vote of the senate. i had no idea when i started whether i would win or lose. now, there's even a greater challenge here.