but i certainly understand commissioner rosch's position. >> i appreciate your comments. i might close my thoughts by saying certainly the agency has large scope, the commission does, over the determination as to what's going to be on its plate. certainly you get directives from congress and from other directions but you make those decisions so it might be helpful for myself at least to see as budgets were to shrink where you would choose to prioritize and sometimes agencies choose to prioritize those things that would -- eliminate those things that would get the most attention. that's obviously not the type of list i'm looking for, the ones that would cause us the most strain, but what you actually see as the lowest priority versus the highest priority in terms of if we had to only do one thing, this would be it. if we got to do two things, this would be it, that would be useful as we try to determine where to best spend our money. >> that's a fair point. let me come back to you with those ideas. i would also say as our agency, again, generally, we try to come up with a bipartisan consensus about what we want to do and we

try to look at things that are the greatest good for the greatest number of people. because you know, we do have finite resources. >> thank you, mr. chairman. thank you, madam chair. >> thank you. ms. lee. thank you for being patient. >> good to be back. good to see you. let me first thank you for this hearing, thank both of you for being here today and for your service and just say how important i think today is, because we're marking consumer protection week, and i believe consumers need more protection now than ever, and your ftc, this is so important in terms of consumer protection. i want to ask a couple of questions in terms of deceptive and unfair practices as we see it in the predatory lending and discrimination in lending as deceptive or fraudulent loan service. i know you don't have jurisdiction over banks and thrifts but you do have

jurisdiction over nonbank mortgage companies, mortgage brokers and other nonbanking finance companies. it's this sector of the industry that really has had some of the worst actors in the subprime mortgage crisis and many of them were guilty of discrimination and illegal steering of minority borrowers predatory subprime loans. most of those fly-by-night companies have collapsed, thank goodness, but they were quickly replaced by companies who offered to rescue homeowners from the very predatory or fraudulent mortgages that really brought down our economy. communities like, i'll give you an example, like in my district in east oakland, they were targeted, entire communities, by misleading advertising, unfair and predatory loans and discriminatory lending, and these were targeted based on race and ethnicity.

now, unfortunately, they are falling prey to scams that really promise to save their homes and lower their mortgage payments and these are many scams going on. so your agency, i know, is busy as ever. but you have some help, of course, along the way but you mentioned and we all recognize it's going to take a couple of years for the consumer financial protection bureau to, you know, really be fully operational. so in the meantime, let me find out what you all are doing on these mortgage rescue scams. do you have your materials that are bilingual and can they effectively hit the hardest-hit minority communities, and i would like know a little bit about your outreach campaigns into these neighborhoods and just exactly what you're doing, and i think your budget, given the lack of consumer protection in these scams that are taking place, i think you need more

resources, because consumers really are -- i mean, the middle class has fallen into now the ranks of the poor and in large part it's these subprime mortgages that have forced them, you know, out of their homes and really, you know, put them out on the streets. so we need to get it together real quick and your agency's very critical in this. so if you ask me, you need more resources to do this. >> appreciate that. let me start and i will turn it over to commissioner rosch. so most of our -- all of our consumer protection materials are in spanish now. and it's critically important we do that. some other languages, we have some in korean, some in chinese, some in vietnamese. it's sort of, particularly if we see a particular scam targeting a particular demographic, we will spend the time and the cost to make sure we have translations into the population that can use this information the best, and then we have a

terrific website. some of you i know blink to on it the committee, that consumers use all the time. we have millions of hits on our website every year. in terms of the cases we're bringing, foreclosure rescue scams, credit reduction scams, we have probably brought more than 40 in the last three years, and with state ags, probably over 200 in just those two categories alone and they have benefited, you know, mostly people who are in arrears of course on mortgages, as willie sutton said, why do you rob banks, that's where the money is. we saw the malefactors go into the foreclosure rescue business, you know. you used to hear the ads on tv or radio saying give us $3,000 and we'll take care of your problem. they took the money and didn't do anything because 97% of the people at these companies were in sales and 1% was in sort of at most was in trying to renegotiate on behalf of consumers. we also passed with the help of congress a bipartisan -- because

congress gave us the authority, a bipartisan mortgage rule that banned advance fees. it was unanimous on the commission, and a modification telemarketing sales rule for debt reduction so you see far fewer, i don't want to say none, but you see far fewer of those scams with the advance fees right now. and so -- and then in the particular discriminatory context, we have brought more than -- at least a handful of cases. there was a case involving spanish language borrowers in california who were being charged on average a quarter point more for their -- maybe a little more than that for mortgages. it was the gem case. was it the gem case? and we have had other cases in that area and then you know, we reach out to legal services, to community groups, to honest businesses who don't want to be at a competitive disadvantage

from the crooked ones to try to come up with more cases and we'll be doing it. >> well, two things. well, three things. first of all, congresswoman lee, first of all, i happen to live in your district for a long time so i know what problems you're facing. >> thank you. >> that said, several things. first of all, i think it is probably, and you know this, we're not doing minorities any favors by getting them out of their houses into houses that they can't afford. we discovered that in the compucare case back whenever we brought that, and that was partially owned by the naacp, as a matter of fact. so we were aware of that at the time and we told them that if

people were moving because of fraud, we were going to clamp down on that, and we did. we returned a lot of money to consumers as a result of that fraud. that said, i think that probably the biggest problem that we have at the commission today is probably cheap consents. what do i mean by cheap consents. first of all, i don't think that anything is in the public interest if it's a consent agreement, a consent settlement, that doesn't return any money to consumers, and these are brought in to me all the time. people spend their money as soon as they make it. so a lot of these scammers are terrible people, are consenting out and it's cheap.

it's cheap for them to settle out. second, we have the same problem that the s.e.c. has, except in spades because we do not by and large require people to admit liability. we just took a consent, for example, in which we did not agree or we agreed to let these people deny liability, and i don't think that that's a good use of public funds at all. >> why is it that we don't require the admittance of liability? >> i don't know. >> is that a legal issue? the law prohibits that? >> well, a judge in new york has just brought, rykoff is his name, and he just questioned the s.e.c. as to whether or not they are -- they can legally have a

consent that neither admits nor denies liability. now, we have been taking those for years so i don't really have any problems with those. but i do have a problem with a consent that just simply denies that there is any liability at all. that's to me a cheap consent and i will not go along with it. and i have told people that i will not go along with it. >> let me just say, i absolutely agree with commissioner rosch that we need to have more cases in which we get disgorgement or in which we get restitution for victims but i would also say this. we are a little, as i understand it, a little different than the s.e.c. in the sense that we litigate lots of cases. i think in 2011, we brought something like a little over 100 cases, primarily not exclusively but primarily enforcement agency

and policy agency as well. but about -- in 2012 we currently have something like -- or in 2011, we currently have about half that number in litigation. roughly half. so we litigate a lot of cases. we also settle a lot of cases. now, i would also say sometimes commissioner rosch, usually when we have settlements or often we have settlements, it's about the companies will say we don't want to admit liability. we don't deny liability but we don't admit liability. i will look at this particular case in which they denied liability. that's very unusual. but you know, it's important to shut down ongoing fraud and sometimes, not always, hindsight is always 20/20, you can get better relief or just as good relief that's just as good if you take a consent and then you move on to the next malefactor. i'm not saying we do triage

against fraudsters or bad guys but there are a lot of people out there so if we can get a pretty good consent that we think is as good as we will get in court, we sometimes take it. i agree with commissioner rosch, it is important we do more disgorgement and more restitution. >> can i ask one more quick question? have you looked at civil rights statutes and say for example the targeting of spanish-speaking homeowners? that to me, we're looking at other areas in this, this could be a civil rights statute violation. >> one of the cases we brought is equal credit opportunity act so yes, we sometimes can use the civil rights act as well within our bailiwick. >> thank you, madam chair. >> mr. graves? >> thank you, madam chair. mr. chairman, commissioner, thanks for being here. i'm intrigued, it's sort of nice to go last every now and then because you hear all the questions and there's a lot of good dialogue. mr. yoder really gets to the heart of it all. that is as we sit here on this

panel and we look at the request that's put before us, we realize the dire condition our nation's in from a fiscal perspective, i have to say it troubles me a little bit that, you know, what's put before us is really not going to save our nation in any way. it's almost to me appears to be a deferance to other agencies, other departments, other areas that must take responsibility for all this crazy spending that's going on in washington when i think it needs to be addressed in totality by all, all agencies and departments. so if you could help me a little bit with the history of the cfpb and how, where that departure occurs, where that funding goes. i know it was discussed a little bit when i was coming in, but help me understand that, where the timeline and how that tracks and where is that being picked up in your request here, and then i was really appreciative of the commissioner's comments about some things going back to the states. i think if there is ever an

opportunity for this congress to devolve some parts of the federal government back to the states where they rightfully belong, this is a good opportunity, with the deficit as high as it is, four consecutive years in trillion dollars and every agency that comes before us just asks for more money. we just heard on this panel that you can do better if you had more. there is no more. we reached that point where there is no more. so from your comments a minute ago, commissioner, what would be some ideas that could go back to the states and that's sort of my second question, and then thirdly, the gao produced the report about duplicative programs. are there any of those that you can see that identified with your commission or are there some on another report later that may come out that maybe you could help us with earlier and we don't have to wait for the report to come out, but where you can say this is being

covered somewhere else. three questions there. >> let me try, okay. the situation, as madam chairman is well aware of the cfpb, has been documented. it was elizabeth warren's idea initially with the white house's blessing, i might add, and frankly, i listened to elizabeth warren up in new york once upon a time and my wife was sitting in the audience and i said what did you think of what i said to her, and my wife said never cross that woman's path again, ever. so that is as far as i was concerned. that said, i did write a letter

to your counterparts on the financial services committee, and i will not say that i got the cold shoulder, and i basically said the same thing that you have said, madam chairman, which is we're layering another unnecessary layer of bureaucracy on top of the ftc, which is doing the job quite nicely now, thank you. but i lost that round. so the question is now, what do we do about it. and the answer to me is we cut back. now, how we cut back since we share jurisdiction with the new cfpb is another matter. i happen to disagree with the chairman that we need to do as much as we always did. because i think there are now two agencies involved in doing that same thing.

the second thing, though, is what do we do about the states. i've talked about one thing. as far as i'm concerned, congressman diaz-balart, my view is that this is -- identity theft is a quintessential theft which is handled best by state authorities, and we have not by and large been involved in doing that sort of thing except on a consumer education basis. and we are doing quite a bit in that regard. that said, let me identify another area where i think we can hand off more to the states, and it is in mergers. there is no question that we are getting second requests at discovery that is more voluminous than we used to get, and that happened in private practice to me as well,

particularly when online discovery was de rigeur and unchecked. but that said, what we ought to be doing in my judgment is handing off some of this to the states. they have state attorneys general whom you will see and you have seen are perfectly well able to handle this task for the time being. i don't agree forever. i agree with congresswoman lee in that regard. but now is not the time. >> thank you. if i could add a little bit or ask one more follow-up on that. i know, chairman, you wanted to respond, too. you used the term layer when referring to the cfpb so you're saying to us then that it is not carving out a segment of your appropriations and calling it a

new name. it is ftc remains whole and then there is a new layer or new dollars proposed in the future or for us here shortly, i imagine. that's what i'm trying to get at. because i heard you a minute ago say back in the '70s we had 1800 ftes, and we only have 1200 today. but i can't imagine your budget was -- >> no. >> so over time, did they take portions away, create a new agency, this one kept the same amount, then there was new funding for the other one? it just multiplies over time. >> that's a good question. i think when the agency started shrinking there was no creation of a new agency to draw people away. the cfpb, as tom alluded to, is on a banking pay scale so they pay considerably more for people

who do some of the -- who over time certainly will be doing some of the same work that we do. but i would make this point. and they are off the appropriations, out from under appropriations which i know is a bipartisan issue for this committee going forward. but again, i don't disagree with commissioner rosch. i certainly, you know, we all understand we have to do belt tightening but let's say you're someone who was one of the 450,000 consumers who got a check in the mail from the federal trade commission because of loan servicing violations by countrywide then bought by bank of america. it's hard to say to them well, we're going to reduce the funding of the federal trade commission and as a result, you know, it's going to take longer, it's going to take longer to do that investigation, you might not bring this other case, you know, you might not effectuate

the return of the money from what we believe was a pretty clear rip-off of larding up $300 for mowing the lawn, putting it on someone's servicing bill, then adding late fees and a variety of other fees. it's hard to tell those consumers we can't help you or we can't help you as soon as we would. so over time, if the cfpb survives and does the things that i believe it will, on behalf of consumers, then i think that's a real debate to have and i think we probably -- i would probably be agreeing with commissioner rosch that we should move our resources around but i don't think you want to leave a gap here or two years. cfpb, terrific people there. a really good head of the agency. but they have not brought -- you know, their future is i think we all understand somewhat uncertain, at least in the next year or two, and you know, they haven't brought a case yet because they're a new agency. and i don't -- one more thing

and i'll stop. i don't envy you. you have tough choices to make, right, and whatever the choices you make, congressman, we're going to work within those parameters, but what i do know, and what i think commissioner rosch agrees with me on is that we're a really good agency. so i respect his position that you know, we should just stay flat and if that's where you end up, that's what we're going to do and we're going to do the best we can. >> thank you. you know, i hear what you're saying. every department that comes before us says the same thing. we're so important, so important, so important, and you know, i know certainly there are very important tasks you take care of. but i left north georgia earlier today, three children, kissed them all this morning, they went off to elementary school, middle school, innocent and unaware of you sitting before us today. and i wonder what would you say

to them. they're the ones who are going to have to pay for this. your children, grandchildren, if you have them, are the ones that will have to pay for this, yet we -- so you say the decisions are difficult for us. they're really not. they're not that difficult. they just get delayed because we don't get some assistance that we're asking for from the various agencies and department heads. i will sort of leave it with that. i think we as a congress have got to come to grips with this. i think each of us have to do it together. we hear the call for bipartisanship. this is the opportunity for us all to do it together but going on a fifth year of trillion dollar deficits is not the path that we need to be on. >> understand. >> thank you, madam chair. >> thank you so much, mr. graves. all right. so we're not finished yet with the cfpb because i have a couple more questions and it has really less to do with the cfpb and more to do with you all, but i am curious about this whole process, because you know, i don't like duplication at all

and it is i think a waste of resources, and so let me ask this. number one, the 21 folks that went over to cfpb, what do they do? what were their jobs at the ftc? >> they were economists. they were attorneys. some but not all of them did financial fraud issues for nonbank -- >> right. right. nonbank financial institutions. >> where we have jurisdiction. >> right. >> and you know, they were on whole as is typical of our agency, very good competent attorneys and economists. >> so they were -- were they asked specifically by the cfpb folks or did you say to them if you want to go over and keep working on this, these issues, you can go? how did that whole thing transpire?

>> so i think we sent over a couple of detailees early on just to make sure folks knew what they were doing in areas that they didn't inherit, because remember, they took the consumer protection functions from the banking agencies and sort of -- and put them together in a different way but they hadn't done a lot of what we had done so we sent over a few detailees. for the most part they've been hired away. >> i'm still confused why that function technically, the function is leaving you all because i don't understand what is it that they're going to do that's different than from what y'all are currently doing? i realize there's a little bit of bitterness here but -- >> i wouldn't say bitterness. >> but if you're doing something well, why in the world -- healthy competition to me is just using, spreading your resources thinner when you all have expertise in this area. it's just silly. >> so again, i would say it's a really fair question to ask and i think one that i've been

thinking about more since commissioner rosch and i started preparing for this hearing together. i guess i would say this. if over time, we have back-filled most of those positions. perhaps not -- we have about i would say, if you include our regional offices, probably 100 people working on sort of financial fraud issues right now. and we have back-filled most if not all of those positions already but having said that, i think over time, they might be, you know, a very competent and better agency in the financial fraud area, but two things. one is in the next couple years, i think you want to make sure that we're stopping financial fraud and we do have an mou so we don't trip over each other so we don't -- >> right. i read the mou and i still can't figure out what you're doing versus what they're doing. >> well, what we're doing, there was at some -- right. what it does is basically at its bottom, at its most basic level, it says let's let each other

know who we're investigating, right. it doesn't say you take the payday lenders and we'll take the nonbank -- >> so you're basically duplicating. you got a whole list of characters and they're taking one and you're taking one so why aren't we just leaving that with the ftc, period? >> why don't we leave it in the ftc, period? >> yes. >> because, again, none of us has a magic wand. if we did, we might do things differently but i like to think, first of all, that they are, you know, in fact, i know because i look at our complaint data base, that this is a very target-rich environment. there are more people who are doing bad things to consumers than we can go after. so it's good from my perspective of second cop on the beat but the other question is why don't we leave it to the federal trade commission. congress made a determination that, you know, and it wasn't a unanimous determination, but that they would create this new agency and so we work with it and i just don't -- i hear what you're saying. i understand your concerns.

you know, there was obviously some debate as you know early on about whether to just make those functions part of the federal trade commission. >> so then the opposite question then is then why don't we just send that whole piece of what the ftc does there and you all will focus on all of the other things that you do well? >> well, there, i would say, again, i don't want to speak for commissioner rosch, i think some people believe over time that might happen but there we had a very bipartisan view. it was joe barton, henry waxman, barney frank, who was your college classmate, and congressman bachus. everyone agreed we should keep our jurisdiction because we did a really good job and because there was uncertainty over the cfpb, particularly very, very early on. >> commissioner rosch, you are very diplomatic and i understand where you're coming from. >> i have very little to add to

what the chairman has said except the following. first of all, with respect to the people who have gone over there, peggy tuohy, who brought our principal pre-2008 case that yielded consumers millions and millions of dollars, went over to head up the cfpb's new nonbank financial protection program. second, i would point out that the cfpb has exclusive jurisdiction over rule making, over fair debt collection practices. and it may make a rule which is broader than the one that we enforce under the fair debt collection practices act. we don't know.