moneys that come to naval facilities that support us in thateffort. >> all right. thank you. let me ask the mayor according to a special investigative report historic downtown annapolis experienced at least half a foot of flooding at high tide no more than four times last year. how has this increased flooding impacted local communities and businesses? what are they saying to you about this and have you heard from mayors of other coastal towns who have to deal with impacts of climate change. >> i serve on the maryland municipal league. a lot of the cities are close to the water. it's something that we talk about and something that the other mayors effect. and there is consensus built upon. out of the 157 cities in the state of maryland only four have partisan elections. the other ones you just run on

your name. in annapolis it's a big deal. people talk about it all the time. a lot of concern from business owners and what are we doing to address it. but we have a plan in place. we just need the funding to implement it going forward. >> okay. i'm going to skip mr. baker because my questions were about rock fish and striped bass. and i think you mentioned that on the one hand, you know -- rock fish are back. but on the other hand what's happening in terms of climate change could severely impact them. did you want to add to that? >> one of the being concerns is a wasting disease. there is no real absolute knowledge as to what causes it. but we know that when fish are stressed, they're more prone to disease. so the general thinking is that a fish under stress has a lot more problems than one that

isn't. and certainly, the population is starting to dip again. >> okay. let me then go to lastly to dr. ekwurzel. because the noaa recently released the state of the climate in a 2014 report that represents data from scientists around the globe and i know you stressed -- you gave us a lot of information about annapolis and maryland. but i -- if i could just go, you know, beyond that you know, according to the state of the climate 2014 report, 2014 was the warmest year in the historical record. in fact 17 of the 18 warmest years on record have occurred in the last 18 years. this is worldwide. just give us -- if you could talk more globally. the average global surface temperature for 2014 was roughly half a degree above the 30-year

average. what effect does that have? >> those are disturbing trends. in fact we've -- even just a couple months ago noaa found that the global sea surface temperature is the warmest after and the land, so combined. that meant at the time for example when there was extreme inland flooding in texas, where -- and in oklahoma where unfortunately tragically a lot of people lost property and in fact loss of life, the hugely warm waters of the gulf of mexico bringing in this extra precipitation and fueling some of the intense thunderstorm activities are something that are causing inland concerns for people who are living along river valleys. and then with the tropical storms you mentioned irene, congressman tonko we see the

warmer oceans in fact when hurricanes naturally occur they are carrying more precipitation. so when it comes on shore and going inland and moving up into the united states it is dumping intense levels of precipitation. you're warrick out bridges in vermont. you are having -- the bulls-eye of -- is causing incredible damage to people who are not used to having their basement flooded, black mold, a lot of costs that are happening. children you don't want to be exposed to some of these longer term effects of flooding. the other aspect are the wildfires. in some areas we have too much rain and other areas in california and alaska we have intense wildfires. alaska is burning, we have the pacific northwest. we don't have enough resources to fight all these fires right now. part of that is because of the polar jet stream pattern that is set up. this extreme high pressure that some think relating back to sea

ice decreasing in the high north. that means alaska all the way down to california immense drought conditions and we get a lot of our food from the central valley of california. the almonds. we have a lot of economic damages that are related to shifting climate and the extremes that are setting up. dry places are getting extremely dry and other places are getting too much rain all at once and too intense. we have high flash flood risk. this is the type of situation that is unfortunately climate change we have to get used to more extremes and the infrastructure of the past century is not built to handle the type of extremes that mother nature is throwing us with a little assist by human activities. >> congress sarbanes? >> mayor pantelides you mentioned you had a town hall recently and the turnout was very large 150 people.

i'm curious what are the residents saying to you? i know they talked about who should take responsibility local. but what's the basic input that they're providing to you? and how are they projecting their own willingness to be -- help be responsible for the solutions? i'd be curious the perspective you've got there. >> i think it's a very interesting town hall. there are so many key players that are involved. you have people from the insurance company that obviously have an interest in updated fema maps. you have the residents who are concerned about their property. as the doctor eluded to if it's going to rise this much where should they live? i think they want a sense of what's being done and it's been rewarding to tackle this challenge and i'm glad it has gotten attention in the local

media. for far too long it's an issue that has been worked on but not really talked about. now that we have some more people are engaging. i want to take a point of personal privilege to mention my colleagues from the city council. i could do it without them. we have alderman kirby and joe budge as well. and ross arnett. half of my council is here. we technically have a quorum if we want to vote on anything. they have been big supporters on this as well. >> admiral carter the students that are taking these two courses that you mentioned, tell me a little bit about the perspective they are bringing and the level of enthusiasm, interest, ownership of the issue which i imagine is helping to inform the naval academy in terms of the focus on the issues

going forward. but i am interested on the perspective that the midshipmen have. >> i want to make a highlight of my colonel steve lewzewski. he is leading the brigade of midshipmen and on two and a half weeks of leading the class of 2019. you may have seen them walking around today. this is key to your answer because these are the talented young men and women that you provide from your districts and that we have here representing every state and voting district in the country. i'm very proud of the talent that families of americans send us to come here to the naval academy. as a lot of you may know we have 25 academic majors at the naval academy. we focus on science technology

engineering and mathematics. 65% of our graduates leave here in a discipline that is involved in some sort of scientific endeavor. and oceanography is one of our science majors. i'm an oceanography major here. it's one of our more popular majors. it's a technical science and it's a science that has application to what they're going to do whether they're going to be an aviator a submariner, a marine, a fighter pilot. it impacts all their communities when they go out to serve. the talent we get here at the naval academy is such that many are finishing the 140 core credit curriculum in less than four years. that is significant. regardless of what their major is a lot of them are able to go into advanced studies which we do with partner colleges and

universities or more importantly to get involved in capstone projects. this is the area where many of our midshipmen can do work in understanding climate change and patterns in the study. many of our oceanographers go on international trips. we have sent some to antarctica to do ice measurements. the midshipmen are out there. they are doing cutting edge research and development as part of their curriculum here. that's not just so they can be smarter when they graduate. part of our charter is not just prepare them to be future commissioned officers, but they are be the talent to help solve these problems 15, 30, 100 years from now. >> excellent. thank you. will baker, thanks for speaking

from the heart as you always do in your testimony. i wondered if you could talk about what you hear in terms of the economic impact of these challenges to the bay. because oftentimes we can put an exclusive environmental lens on it. but i imagine that businesses are coming to you all the time and expressing their anxieties related to the fortunes of the bay. and if you could describe that with a little bit more detail i think it will drive home why -- why economic opportunity and empowerment is very aligned with preserving and protecting the health of the bay? >> thank you, congressman. about a year ago we began working with dr. spencer philips a distinguished economist who works in virginia and maryland. we asked him to assess the value of the chesapeake bay and its watershed to the economy of the

region now, if it's improved and if it's not addressed. and the numbers are staggering. the economic -- current economic value of the bay and the region, environmental value to the economy is about $107 billion annually. if the clean water blueprint is successful by 2025 that value can increase to almost $130 billion annually. if we are not successful it will decrease. so in terms of ecosystem services to the economy, the numbers are staggering. but when you get right down to individuals who are making their livelihood certainly the commercial watermen charter boat captains, people who are involved in the tourism industries the impact is dramatic and immediate as well. i mean, when you talk to folks

on smith tangier and across the eastern shore and you hear how their livelihoods have been impact it over just the last 35 years it's just extraordinary. so you can go beyond that to seafood restaurants, to our member, you know -- the impact of the chesapeake bay on our region, someone once said if you look at a telephone book from a major metropolitan area, the number of columns of companies that use chesapeake in their name is staggering. this is our identity. we can't let it go. >> thank you. i have a question for dr. ekwurzel but maybe we can come back around for a short mini round at the end. >> go ahead. >> you were conveying probably better than anyone in this room could the urgency of the issue.

and it appears that what i'm hearing from climate scientists and the testimony we get on this issue is just how things are accelerating. it's not a linear progression, right? and you know even two three four, five years ago as we were projecting out. people -- it was still an abstract concept for a lot of folks and we would talk about sort of these scenarios about the future. but they're really here now. as you say, you are talking about within the life of a mortgage getting to places where you are going to have 300, 400 flooding events in the city of annapolis. you talked about a high that trajectory path and a low trajectory path. can you comment on the idea of the acceleration of the impact

that's happening? because i think that is creating an urgency that really ought to make this the number one overarching focus of policymakers in many different places. if you could talk to that. >> absolutely. these are impacts that we're feeling already and we're playing catch up. and unfortunately, as a scientist i see all the curves for how fast it's taking off and we've only barely tasted whatever in store. we're at the point where how we make the changes over the next ten years really do play out and whether we go that low emissions or the high emissions pathway make a big difference on lives economy, and cost of doing business anywhere along the coast. and as well as interior to many of the land areas. and i would like to say doing emissions reductions is one of

those adaptation costs is the tide that floats all boats. when we reduce the pace of change it allows the mayor of annapolis, the naval academy to put in flood barriers at a most cost effective way and do plans that are reasonable and not hurting the economy as much as if we just keep reacting to this -- we're ready to take off. if we can avoid taking off it makes a world of difference. as some people say it's a difference between suffering and a somewhat manageable world. >> thank you. congressman tonko. >> thank you, congressman. the stewardship, again vice admiral that comes via the navy is so incredibly important and i thank you and the navy in general and our military in general for addressing climate change. when i look at operations that are far inland like that in

saratoga where you once serve that i represent and some of our coastal situations like norfolk and annapolis there's no denying that as we create these perfect storms if you will, as spoken to you know, congressman van hollen it's impacting some of the most unstable -- you know, the fight for available land and some of the hardships with droughts and flooding will impact people that can least endure around the world. and so it's obvious this becomes an issue of national security. so given that, and recognizing that the navy is speaking to these concerns where is the prioritization within the navy? how would you characterize that? is it a concept that has risen to the higher levels or -- of priority? >> sir, first of all, i'm going

to make sure everybody recognizes that i represent the naval academy but i will not deny i have served 34 years in the navy and sailed many of the oceans of the sea on many aircraft carriers and other ships. to answer your question from my personal opinion i do believe our united states navy and the department of defense has raised this up to a very high level. my good friend rear admiral jonathan white who is the oceanographer for the navy he leads a panel called the navy task force climate change that has multiple partners in the navy in the staff to take an operational risk view of some of these challenges. so they're trying to apply science. they're trying to apply all the data that we see so we are leaning forward in making sure we understand what these future challenges are. i will also give you my global view as a sailor. i think everyone here would

agree that the earth is covered by 70% water. so as a navy that gives us a pretty big area which to patrol with our ships. we are a global navy. we are from the strait of hormuz to the inland coasts. 90% of all of global trade moves through the water specifically through key choke points like the strait of hormuz and the canals. we have a responsibility to make sure that those sea lanes of communication remain open because our world trade requires that. so as we look at the science and the risk analysis of what's happening here those are potential risk areas. i will tell you just three years ago, i was the admiral in

charge of the uss enterprise and all the carriers in that strike group. we were charged with going through the strait of hormuz many times to make sure that waterway remained open as the threat of the iranians was to tenlly do something there to disrupt trade and movement of oil through that strait. we took that aircraft carrier through the strait in the summer of 2012 ten times. the sea water inlet temperature in that part of the world is often above 90 degrees in the summer. but in that particular year it approached almost 100 degrees. that is a difficult place for anyone to operate. and of course as we've already talked about on our return journey home one of the greatest environmental disasters ever known to man was hurricane sandy. i had the distinct bad timing to

have to bring enterprise home right in the middle of sandy. we threaded the needle between three tropical storms. sandy was the lesser of the three as she was forming and our journey home to cross the atlantic was a to deal with hurricane sandy in a way that as of course we were worried about our homes on the eastern sea board i had an aircraft carrier and the men and women on that ship, a cruiser and three destroyers going through seas that exceeded well over 20 feet. i saw water come over the bow of the enterprise 60 feet above the water as we were coming across the middle of the atlantic. i was a thousand miles away from sandy. so i saw first hand what it's like to try to deal with a storm of that magnitude and what that impact is for my role as part of that national security apparatus. i was very thankful that due to

a lot of hard work from my sailors we didn't damage any equipment. she came home on all nuclear reactors and all the sailors flew off. and then what that did here to the united states. the other part of that 70% water, 90% trade is maybe one of the most important aspects and that is 80% of not only the united states but the world's population lives within 500 miles of the shore. as we talk about the impacts of what sea level rise has been, even here in the specifics peekchesapeake, that has an impact. it's not only something we are worried at the academy, the navy is paying close attention to it. as we are setting up our own advisory committee here, we want to make sure what the local impacts are. i know that our united states navy is taking a look at this at

a much larger scale to help not only protect what we know from data in the past but look forward to how to present solutions from the future. >> i think just looking through the lens of our military you would think that would be enough to push the moral compass in washington to get this issue resolved. mayor, you mentioned the order of planning that's required for you and the members of the city council. what sort of relief would be doable do you think if the federal portion were a true player in this regard? would you think that a major piece of the pie that you need for that planning was that a million plus i think you said? >> it was a million plus just for the design phase. and that puts it in perspective. but our total budget is $98 million. but just to understand how it works. and the superintendent's

leadership with the two courses and the capstone chances we have we can make annapolis the model. i don't say that selfishly but it has an impact for legislatures in the state. the local gags has 47 senators and 140 delegates and they all live here three months out of the year. so when we work on environmental projects they will have an opportunity to see it. i think if the funding was in place, our public works director was a cb in the navy we have the opportunity to make a significant impact on it. we need the resources to make that happen. >> just by way of observation you can sense the richness of heritage and history. when we were impacted by irene and lee, there were tremendous damages that impacted our heritage infrastructure which

is something that's very difficult to replace and so we need to be sensitive to that also. and to mr. baker, the construct of the chesapeake bay is dealing with a multistate impact. is there talk amongst your group about the role of the -- or the -- the issue of boundaries, state boundaries, whatever political lines coming into play with this discussion of climate change? because it takes these incidents to realize that we're inexorably linked. >> as we were talking about before the hearing started, the environment and everything about the environment knows no political boundaries. if you look at a watershed like the chesapeake bay whether talking about pollution or

global climate change mitigation the only jurisdiction of government that can treat this system the way science tells us we must is the federal government. >> absolutely. >> and the federal government has been through epa, through usda a great partner with the states. the states and the federal governments have entered into this partnership willingly. we see that as the real hope for the future and that this effort now which is really the third major one in 30 years, has the potential to be a game changer. if in fact, all players stay at the table. >> it's national strategy and why the president reached to an executive order because congress simply did not act and they had plenty of time. we are still trying to accept the notion when we should be addressing the concept. and doctor, you spoke of -- in your encroaching tides study you

speak to the high and low emission issues. can you just elaborate on that a bit more? >> sure. >> when you talk about irene and lee in my district and the heavy amounts of precipitation. 14 inches within less than 24 hours. and neighboring communities got perhaps, three. not only was it saturation of precipitation, but sporadic activity within a small given radius of geography. >> it's very difficult to plan for the extremes that climate can deliver. it's on a scale that we just haven't had to face in the past. and so the past is not helping us. so the difference is really you know local communities dealing with the flooding of irene or annapolis, is it really fair to ask local community to bear the brunt of the cost to adapt to

this when many of us have contributed to the challenge? and again, the federal government has a key role to play, either we're reacting to disasters and disaster funds are there or we're proactive planning for 2030, the time of a mortgage and making plans with local community input that is so key but having the decision support that all of our federal agencies can provide that help planners. so the two levels of planning i say, we should -- we should mitigate for the low emission scenario but adapt and plan for the high emission scenario. all the numbers i gave you, in new york for example kingspoint new york if we prepare for 264 flood events but reduce emissions and they will be protected because maybe in

2045 it would only be 67 flood events if we reduce the emissions of the united states and global partners around the world. we'll be much safer. >> that's music to the ears of an engineers, planning. thank you very much. >> congressman van hollen. >> thank you mr. chairman. and i want to thank all of you for your testimony. very very helpful. look it helps provide real texture and specific examples of costs that are being incurred on a real-time basis. and as i see it, there's two types of costs, the costs that we're incurring from much more intense and extreme weather events caused by climate change and there are the costs of mitigation, to try to reduce the

impact of those longer-term costs but they all add up. and mr. mayor, you talked about a town hall meeting where people were trying to decide who would help pay the bill for the mitigation costs with some of your colleagues is it city of annapolis? is it the state? and the reality as dr. ekwurzel has said that these costs are being driven in many cases by a lack of action at the national level and at the international level. and so i think the first thing we have to do is make sure the public understands and i think they increasingly do through the testimony like you're giving today and the superintendent is giving today people in charge of a city and facility and you add up the costs just to the city and the facility and multiply it by the facility around the country that's a big bill. and the mayor talked about the

insurance agents being present at the meeting. that's just to look at the flood maps for the city of annapolis and the impact on insurance rates there. the increased insurance rates americans are going to be paying as a result of climate change are going up and up and up, big costs. so i think it's really important to collect this testimony as part of our argument to the public about the need to make the kind of changes that dr. ekwurzel and mr. baker are saying at the national level. and there's a huge cost differential between the business as usual path and the path where we actually begin to address this issue and i don't know, doctor if you could tell us what policies you believe are necessary at the federal level in order to get off the business as usual path? >> i think we do need a

preparedness planning and assistance and preparedness and not just disaster response. so that's very important. and there are wildfire disaster bills before congress and. that and also we need to have the externality of the price on fossil fuel carbon burning and so that we can pay for the adaptation costs, help with planning for the future and make the costs more manageable. there are different ways of doing that. there are lot of subsidies that incentivize burning fossil fuel even if that money were just stopped that would bring money back to the state and federal coffers that could help state and local communities prepare. not even a price a new price added price, but just stopping the fossil fuel subsidies. to change that calculus of the

economic incentives we need to have some resources to better plan. in the long run it's much more cost effective than just responding to these extreme events. >> right. let me -- right. so we're making things worse in two ways in terms of subsidizing some of the fossil fuels that are accelerating the problem and through lack of action to increase, not just get rid of the subsidies but put a price on carbon. i'd like to ask you, mr. baker about the impact on the warming water. because mr. sarbanes asked you about the economic value of the bay. the bay obviously has huge value to the state and the country and the world beyond just the economic value but the economic value is huge. it's essential to the state of maryland in terms of tourism, in terms of the watermen, and the rock fish and the oysters.

as i look at your report you point out that there is based on the inner governmental panel on climate change model, the waters of the bay could potentially rise to -- by five degrees celsius by 2070 to 2099. i'm not a biologist but there are just some things you can't mitigate if you get into that kind of territory like whether or not certain species survive or not. i'd be interested if there has been an analysis on what the impact to the bay resources would be if the temperatures really went up to something like five degrees celsius. >> thank you congressman. you know water temperature is one of the most basic measurements that science takes and it's something we do on all of our educational field trips.

the impact of anything anywhere near that level of increase let's just take two examples. one eel grass, the dominant species of underwater grass in virginia. it really can't survive above 80 degrees. you lose the eel grass and you lose the crab population and it cascades through the system. warm water does not hold as much oxygen. we have a severe problem of low dissolved oxygen in the chesapeake bay dead zones. and to your prior question when i talk to some of my friends who are climate deniers, i say let's stop the argument about whether or not it's true or not. are you against reducing pollution? oh no they say. we're not against reducing pollution. address long-term climate

problems is all about reducing pollution. and that's the two sides of the same coin one plus one equaling three. it also creates jobs. over and over and over again we see that ways of reducing pollution and doing things differently require new technologies, demand new jobs, new investments. there is absolutely no reason why we shouldn't be proceeding down this path with all deliberate speed. it will help every aspect of our society. >> thank you. just in closing, mr. chairman, i think clearly the responsible thing to do is to plan for what we see happening in terms of the impact of climate change. but we would be totally irresponsible if we don't work from the other end in terms of trying to reduce the increasing

climate change when we know that it's within our power to help reduce the impact. i just want to close by -- there are some things that cannot be mitigated. if you have a five-degree celsius increase in temperature of the bay and it wipes out species it's hard to mitigate for that. no matter how hard you try. so as we plan to address these challenges, we've got to really on an urgent and emergency basis take -- put in place policies at the federal level to begin to reduce the overall threat of climate change directly. i mean if we were to have a disease here i think we'd be spending a lot of money as a country to treat the disease. but we'd also have a full-blown effort to try and come up with a vaccine to get at the root causes to prevent people from getting it at the beginning. we have to do the treatment but also have to address the cause. thank you. >> thank you.

i guess we've been here about an hour and 45 minutes. i don't want to keep everybody much longer. but -- and i think it's been extremely worth while in terms of the questions, the responses, what we've gathered here today. but i don't want to stop anybody. if any member of the panel wants to ask something else or make an additional comment or some of our witnesses feel they would like to add something. go ahead. >> if i could just quickly toss out and perhaps we don't need to discuss it here if you want to get information back our way. but one of the tough lessons learned and experienced in superstorm sandy and in irene and lee in new york was the impact on utility infrastructure and what survived and what didn't. distributed generation, obviously being there where we saw many going without utility service for days upon days

impact on small business, agricultural and certainly households and household budgets. so if you just want to give a brief statement about any ideas you have about the utility infrastructure that recalculation of thinking that we need to do in order to again do the preventive therapies which are hard to advance but they were real lessons learned. and hopefully we'll respond in a way that moves to those concepts that work. >> in terms of utilities, the city of annapolis has taken on a very ambitious goal. we're currently working to have the largest solar park on a closed landfill in the country. and one of the things we saw is we have an old landfill that is covered up let's make it an asset. it's turning over the land to a private person to put up solar

panels. it's part of the ways we are reducing greenhouse gas and addressing the way that energy is transferred. >> congressman tonko as i mentioned in my statement a lot of the actions that we did after the actions that we saw with the tropical storm in 2003 were to relocate a lot of our key infrastructure here on the yard of the naval academy to higher elevations, the hvac units were moved. there is no high wires here on the campus. so most of the power lines all the cabling and all of our steam lines, everything runs pretty much underground. so we went through and did a significant overhaul of that to make sure that those keep elements of that are placed in those tunnels in a place that when water does go into there they are not at the bottom. that was all done to make sure in the risk management of

knowing that we're going to have the three categories of flooding, the nuisance flooding we described, the flooding after a major rainfall and the big event. how do we mitigate that so we minimize the amount of damage. and finally i'd like to say, we are the navy. we operate and live at sea level. this property here 338 acres much of it was reclaimed from the river and the creek here. so we are what we are. and we teach our midshipmen from day one, time, tide, and formation wait for no one. we live this here. >> i want to thank the panel and make a couple of closing comments. i also want to recognize the members of the annapolis city council that are here and thank them for their good work stepping up to this challenge and to each of our witnesses your testimony has been powerful

and will be useful as we go back to washington and try to push for this. and thank you mayor pantelides for having the city of annapolis host us and for vice admiral carter for not just hosting us today but for everything you do here. it's a source of incredible pride for all members of congress when we the opportunity to nominate people to the various service academies, including the navy academy. a particular point of pride for me that i represent the naval academy here in the third district. i want to salute again the members of the audience who have come, all bring a deep interest in the issue of climate change. and i want to try to not overstate the urgency dimension of this. but why not? you know congressman van hollen presented the scenario, if there

was a disease looming before us out there that posed the same kind of threats in terms of not impact on infrastructure not impact on wider nature, perhaps, even though those are key concerns but just the human toll that is coming from this threat, it seems if that was coming from any other place we would be -- every command center in the country would be occupied right now and congress and state legislatures would be meeting in emergency sessions to deal with the threat. we need to move to that level of urgency if we're going to address this before these trajectories overcome us and before it's too late. i hope that this testimony that we received today will be helpful in conveying that sense of urgency on to our colleagues and to the wider congress. i know that the audience is activated behind the importance

of this issue and will continue to work with everybody for whom this is a real priority. thank you, mr. chairman, for coming to maryland, to annapolis, to naval academy to be a part of this hearing and thank you to all of our witnesses. >> thank you. i couldn't have asked for a better group of witnesses to basically relate some of our concerns and give us important information. before we close if any of you wanted to add something, speak up, otherwise -- all right. this truly was -- i don't -- you probably say he says that to everybody. but we really don't. some of our congressional hearings are rather boring and not terribly helpful but this is not in that category. thank you all again. we really appreciate your testimony. thanks. >> thank you, everyone. [ applause ] on the next washington

journal, weekly standard online editor daniel hallpert discusses the 2016 republican race for president. and we look at what is in the iran nuclear agreement, how it will be implemented and the impact on the middle east. we will take your call and you can join the conversation on facebook and twitter. book tv is television for serious readers. and join us on saturday for our all day live coverage of the harlem book fair the flagship african-american literary event featuring historian nell irvin

painter. saturday, september 5th we are live from the nation's capital for the national book festival, followed on sunday with our live in depth program with former second lady lynne cheney. that's a few of the upcoming live program on c-span 2's book tv. when frances folsom married grover cleveland she is the only woman to be married in the white house and the youngest woman to serve as first lady and when she died she lived 51 years after leaving the white house, longer than any other first lady. frances cleveland on first ladies examining the women who

filled the role of first lady. sundays at 8:00 p.m. eastern on american history tv on c-span3. a recent report by the consumer financial protection bureau showed that agency actions resulted in financial institutions paying $114 million in compensation to consumers. this is just over two hours. this meeting will come to order. today the committee will hear from richard cordray, the direct over the -- the bureau has grown to over 1,450 and has been

active since director cordray's last testimony before this committee. among over things it has expanded enforcement action to cover telecom companies and broaden its authority over the auto finance industry. these actions have not been without controversy. many would say that some of them go beyond what congress envisioned in dodd-frank. for instance the legislation of auto lending now involves over 30 nonbank lenders not previously subject to its supervision. this move has been called into question given the exemption for add dealers in dodd-frank. in addition to concerns with regulatory actions issues remain with the bureau's lack of accountability. this has been demonstrated by concerns with the budgeting process including the rising

cost of renovation for the cfpb's federal headquarters. the estimated cost of actual renovation increased from $40 million in february of 2012 to $145 million december 13. this is over three and a half times the initial estimate. the inspector general also estimated the total cost is now closer to $216 million. the administration has yet to explain who approved the renovation and what happened to the documentation involved. unfortunately congress does not have control over how the bureau spends its funds because the cfpb operates outside of the appropriation process. even the federal reserve does not control the bureau's budget. because congress cannot tighten the financial reins when budgeting issues arise, the

bureau's current structure makes meaningful congressional oversight very difficult. so call independence is one reason cited by the

hold hearings and hope that any concern expressed perhaps would be addressed. director, it would be like giving you the authority to implement federal consumer financial laws but withholding the authority to enforce them. i think you would agree that would make you highly ineffective as an agency charged with implementing ore consumer financial loans. it is critical now more than ever because the cfpb's growing reach over the practices of the skpaens in the financial sector. for the time being here we'll conduct heerks and submit respectful respectful respectful respectful respectful requests that may not be fulfilled.

only then will. bureau be accountable to the people's representatives. senator brown. >> director welcome back to the senate banking committee. next week marks the five-year anniversary of the wall street reform act which created the wall street protection. this is the worst the country has seen since the great depression. one of the most troubling before the crisis was that no one was looking out for consumers. consumers were steered into mortgages they couldn't afford. often with terms that were not disclosed. one half a million homes. the height of the crisis, in

2009 one in three ohioans were mortgages under water one in six mortgage holders was at least 30 days delinquent or in foreclosure. they're supposed to be enforcing the financial laws. too often they looked elsewhere. a number of entries developed in the shadows with no federal oversight. cfpp opened its doors four years ago and it's proved over and over that its creation was one of the big success stories of wall street reform. as the chairman speaks of the cfpb's budget, it's important to know that the cfpb returned $10

million to the pockets of 17 million consumers. fined countless companies for egregious consumer abuses including credit card companies adding on unwanted products phone companies cramming fees on to consumer's bills or mortgage services illegally foreclosing on homeowners and service members. the ongoing enforcement shows us that work is not done. 47 states last week took action against a bank for illegally robo signing court documents in selling zombie credit card debt or debt that had already been cleared. i want a bill that will address zombie debt and i hope that cfpb

will continue to produce this issue. consumers take on more debt the opportunity for risky behavior increases. i look forward to hearing from the director what the cfpb views as areas to watch in the consumer market and what the agently will do moving forward. i look forward to hearing when the rules will be finalized on payday, installment loans and entitlement loans and prepaid cards in overdraft in debt collection. we've seen in state after state that as soon as a state passes the legislation to reign them in, they come back.

it was short lived as payday lenders evaded this law as registering as mortgage lenders or by adding fees. the creativity necessitates vigil. and i hope that the loopholes are closed. much of the cfpb's work is centered on mortgage regulation the agency's ability to repay rules ensure that consumers are not trapped in mortgages they can't afford. cfpb's rule to streamline the forms will help consumers understand what's happening at the table during closing. all of these actions speak for themselves as to why this agency is so, so important to millions of americans. yet opponents continue to work to undermine the agency by changing its structure. lately chipping away the actions that the agency took on arbitration and mall dollar loans. argued that the agency should not be allowed to collect data

about markets that were formerly nontransparent and unregulated. i will continue to fight as so many members of this committee will to fight all of these attempt to destabilize the cfpb. our consumers deserve a strong watchdog that can do its job independently and it's our job to make sure that it happens. >> i'd like to enter in the statements from the national federal credit unions with. direct, wur yo written testimony will be made part of the record. you proceed as you wish. >> thank you, senator brown. >> thank you, mr. chairman. ranking member brown, members of

the committee. thank you all for the opportunity to testify today about our latest semiannual report to congress. we appreciate your continued oversight and leadership as we work together to strengthen our financial system. and ensure that it serves consumers, responsible businesses in the long-term foundation to the american economy. i would reiterate, mr. chairman, that we take very seriously the oversight that we get from congress. these hearings are from the senate banking committee which are required by law. it's important oversight for us. we listen carefully for what is said and take it to heart as we go about our work. next week marks five years since the passage of the dodd/frank wall street reform and consumer protection act as has been noted. and it's four years since the consumer bureau actually opened its doors. as you know, congress created this agency in response to the financial crisis, with the purpose and sole focus of protecting consumers in the financial marketplace. we understand our responsibility to stand on the side of consumers, and ensure that they are treated fairly. through fair rules, consistent oversight, appropriate enforcement of the law, and broad-based consumer engagement, the consumer bureau's working to restore people's trust and confidence in the markets they use for everyday financial products and services. to date the bureau's enforcement

activity has resulted in more than $10.1 billion in relief for over 17 million consumers. our supervisory actions have resulted in financial institutions correcting many subpar and illegal practices. and providing almost $200 million in redress to over 1.6 million consumers. we've now handled as was mentioned more than 650,000 complaints. a matter that is particularly important to us. from consumers that address all manners of financial products and services. these consumers are your constituents in each of your states. for example, one excerpt of a complaint from a service member in alabama reads, we opened an account. we paid as agreed until we were unable to pay the full amount. we agreed to pay a lesser amount and paid by allotment. the company got a judgment against us while i was training. i was informed of it when my wages began to be garnished. we've asked repeatedly to have this be fixed.

we have paid the company nearly $25,000 over the past 11 years for furniture. the furniture is not lasted. however, the payments and ruin continue. we need assistance as we have tried every other step possible to fix this without aid. another excerpt from a consumer in my home state of ohio and ranking member's home state reads, i elected and agreed to a reduced rate payment plan with a student loan servicer. my monthly payment was incorrectly allocated which was resulting in late fees and delinquency notice. after speaking with customer service representatives, no resolution has been reached. these are the stories that motivate us in our work. in this our most semiannual report to congress, we attempt to achieve our efforts on behalf of the consumers. consumers fell victim to various violations of consumer

financial protection laws. along with over 32 million in civil money penalties. for example, we took action again a company for illegal debt collection practices that resulted in $2.5 million in relief for service members. we also stopped an illegal kickback scheme for marketing services which resulted in 11.1 million in redress to wronged consumers. we worked with the department of education to obtain $480 million to student loan borrowers who were wronged by corinthian colleges, for a for-profit chain of colleges that has since declared bankruptcy. the bureau also issued a number of proposed final rules. in october 2014, we issued a final rule to reduce burdens on industry by promoting more effective privacy disclosures from financial institutions to their customers. in november 2014, the notice of proposed rule making provides consumer protections for the first time for prepaid cards and accounts that have no such protections. in december 2014, the bureau

issued a proposal to clarify various provisions of the mortgage servicing bureaus. in january 2015 the bureau proposed further changes were made to the mortgage rules to facilitate mortgage lending by small creditors, particularly those in rural or underserved areas, community banks and credit unions. this would increase the number of financial institutions offering different types of mortgages in rural or underserved areas and adjust the business practices to comply with the new rules. as the data driven institution, the consumer bureau presented several reports during this reporting period that highlighted important topics in consumer finance, such as medical debt, arbitration agreement, reverse mortgages, and consumer credit scores and credit reports. we released a tool kit that will encourage consumers to shop for mortgages and better understand how to go about the important task of buying a home. in the years to come, we look forward to continuing to fulfill

congress's vision of an agency that's dedicated to cultivating a consumer financial marketplace based on transparency, responsible practices, sound innovation, and excellent customer service. thank you for the opportunity to testify today. mr. chairman, i look forward to your questions. >> thank you. director cordray, you've said many times that you're accountable to congress. however, you get to determine your budget and how to spend it. neither congress nor the fed can tell you how to allocate taxpayers' money. many members of congress have expressed strong disapproval of your costly building renovations which include a waterfall and four-story glass staircase, and now stands at more than 3 1/2 times, my understanding, the original estimate. has this disapproval by people caused you to change your renovation plans in any way? and if so, tell us what changes you've made, if any. >> two answers to that question. the first on the overall issue of accountability and oversight. we are accountable to this congress in numerous ways, that are in our statute.

the gao does a regular audit of our expenses, and expenditures each year, which is not common to federal agencies. we are subject to an independent audit also by our statute. we're subject to reviews by our inspector general, which have been vigorous. i'm required by law to testify in front of this committee, that's where the congress puts the jurisdiction, and has seemed appropriate in your oversight twice a year. and the house financial services committee twice a year. we have numerous other accountability mechanisms as well. and like the other banking agencies, we are not subject to the appropriation process, but that is not unique. it would be odd if we were different from the others in that respect. as to the building project, that has been overhyped and misrepresented. the building costs have remained essentially static from before we took on this building, and the office of thrift supervision had performed an audit that saw

that the building was in disrepair, and needed an overhaul if it was going to remain a productive government asset. the construction costs have been pretty steady between $95 and $120 million, approximately. we recently let the contracts do competitive bidding and they come in thus far underbudget. and the gsa is managing the program which feels more appropriate to me, they know more about it than i do, and they have stated this is an appropriate government renovation project, well within the cost estimates of similar projects. that's my understanding of that issue. >> thank you. yesterday the bureau announced a settlement of an enforcement action against american honda finance corporation, one of the nation's largest auto industries. as part of the settlement, honda, it's my understanding, must substantially reduce or eliminate entirely the ability of auto dealers to raise or lower the finance rate offered to consumers. a recent american banker article

quoted from a leaked cfpb memo stated that the bureau is seeking to accomplish, quote, the significant limitations of dealer discretion. considering that auto dealers were explicitly exempted from the cfpb's jurisdiction in dodd/frank, how can -- can this be seen as anything other than a back door effort to regulate the auto dealers, which were basically exempt from dodd/frank? >> three things on that. the first is, we and the justice department -- we're not alone in enforcing the equal opportunity act. we work together on that. we did resolve a matter with honda yesterday. and it's to honda's credit, i would commend them, they have taken far-reaching steps to constrain the discretionary markup, which we think has led to discrimination for consumers. and the justice department

thinks has led to discrimination for consumers. it was industry leadership that honda demonstrated yesterday, and i commend them for that. second, in terms of our responsibility here, we have been very careful to observe a line that was not necessarily an obvious or logical line that congress drew, which was to say that the consumer bureau has jurisdiction over auto lenders. but does not have jurisdiction over auto dealers. that jurisdiction, as i understand it, is given to the federal trade commission. we feel that means that the law has spoken clearly, that we have a responsibility to address any sort of issues of discrimination, or other violations of the law by lenders. but not by dealers. that may be illogical, but that's the line we have. and we have taken our responsibilities seriously there. as i say, we have a partner in this work, which is the department of justice. and we work together to address these issues. i think that's been appropriate. but i'm always willing to hear more from members of this committee, and members of congress. we are simply looking to enforce the law, and do it accurately and appropriately.

>> on march the 26th, the bureau released an outline of its proposed plans to end payday debt traps. every state, it's my understanding, either regulates or outright prohibits payday lending. what analysis did the bureau conduct of state laws and regulations prior to deciding it should preempt their regulations? and if you have it, could you provide that analysis to the committee? do you want to comment on it? >> sure. in our statute, there were four issues that were very explicitly given full jurisdiction to the consumer bureau. mortgage origination, mortgage servicing, payday lending and private student lending. those were specifically called out in our statute. we've been working on the issue for years. since we became an agency. we have published two extensive white papers that really detail our analysis of this market. they involved scrutiny of upwards of 15 million loans. it's the most comprehensive work that's ever been done on this

industry. what we concluded from that was that the problem of debt traps, rollovers of loans, was a very significant problem for consumers, and who are in the small dollar loan market. there is a representation this is a product that people get a loan, and repay it, and they get in, get out, and don't end up in a trap. and what we found was that well over half the loans are repeat loans, in sequences of 6, 8, 10, 12 loans, where people are living their lives off of 400 or 500% interest. that's the issue that we're looking and working to address. it is a very complex issue, i will say. we want to preserve access to credit for people who need that credit, and we recognize there is a demand for that credit. at the same time, we do not want consumers to end up harmed by being stuck in a debt trap they cannot get out of. and harming their finances.

that's the dilemma we're trying to confront there. >> thank you. senator brown? >> thank you, mr. chairman. before i begin questions, i'd like to comment on recent attempts to undermine the consumer bureau. last month, the house appropriations committee passed a bill that kills the cfpb's independence. similar attempts have been made in the senate, including the idea that the cfpb governance should be changed to a commission. the argument is that it would be better led by a commission is clearly designed to cripple the bureau and set up one nomination fight after another. we are, i believe, the only committee in the senate to hold a hearing on any of our nominees, most of whom were sent to the committee in january. in contrast in 2007, when senator tester and i joined this committee, when we were in the seventh year of the bush administration, this committee had three nomination hearings and reported out a dozen or so nominees before the august recess. we have important jobs open

waiting for us to act, from a fed nominee, to the treasury undersecretary for terrorism and financial crimes, changing the cfpb's governance would stop the agency in its tracks, and again leave consumers without a federal watchdog. and i would again point out with the criticism that we hear so frequently of the cfpb on budgets, on buildings, all that, that the cfpb has returned over $10 billion to 17 million americans. now, my question, director, i was encouraged to see the release of study of forced arbitration as we required in wall street reform. i'm concerned, but not surprised that the bureau found no evidence that forced arbitration leads to lower prices for consumers. and that 3 out of 4 consumers didn't even know they were subject to an arbitration clause. a couple of months ago, a number of members of this committee sent a letter to the bureau urging swift rule making to ban forced arbitration in consumer contracts.

what is the bureau's thinking on this issue? when can we expect to see action? >> thank you, ranking member brown. first of all, as to nominees, all i can say is, i was very pleased to have the opportunity to be confirmed by the senate in july of 2013. it took a while. but ultimately was a strong vote. and i really appreciated the care with which the senate considered that nomination. i can't speak to the others you're talking about. on the arbitration report, we did issue an arbitration report. congress required us to do that as part of the dodd/frank act. what they said was -- actually, congress did a couple of things that were interesting in arbitration in that law. they first said that they were going to ban outright any sort of arbitration clauses, predisputed arbitration clauses in any mortgage contract. this was a significant shift away from the permissive attitude to the act developed

over decades. they also said, and this is what we're getting to here, that as to the the rest of consumer financial products and services, they required the bureau, mandated that the bureau perform a study and a report to congress on the potential effects of arbitration agreements of that kind. we did that very carefully and deliberately. it took us a couple of years of work, lots of research, and ultimately a significant report that looked into areas that had not been looked into before, comparing arbitration in the consumer context with judicial resolutions. we did issue that report to congress earlier this year. what the statute then says is, having done that, having performed that task, it was then for the bureau to consider what might be done, consistent with the public interest, and consistent with the results of that study to either modify or address predispute arbitration agreements for other consumer financial products and services.

we have determined at this point, having digested our own study, and gotten a great deal of feedback from industry and others on it, that we will be moving ahead with rule-making in this area. and we'll be in due course here convening a small business review panel as the first step in considering what actions to take. so that is where it stands as of this point. >> thank you. we hear from banks about issues related to coordination of exams with prudential regulators. i know the inspector general recently reported it is not found duplication of regulators oversight responsibilities. i'd like you to talk for a moment about your examinations. what's the value of your examination and supervision authority, what are you doing to improve coordination without -- with other agencies of your exams, particularly of smaller institutions so that -- because obviously exams can be costly to them and we want to make sure there's not duplication.

>> this is an area of real focus for us and one where we've made a tremendous amount of progress over the last several years. if you had asked me that question back in 2012 when we were just undertaking our examination program, we were only minimally staffed up. we were probably at about a third of what we needed in terms of manpower. the coordination wasn't as good as we would have liked it to be. at this point i think the coordination has become quite good. not perfect, but quite good. i would say in particular, on the nonbank side, we coordinate bank supervisors who have primary responsibility in that area prior to the consumer bureau entering the scene, and we have done numerous coordinated exams with them. and we share information with them back and forth consistently. with the other federal banking agencies, which is also quite important, because they have credential safety and soundness authority which is significant over these institutions, and

somewhat distinct from our protection authority, the law mandates that we collaborate. the law mandates that we share drafts of examination reports which we do back and forth. the law mandates that as we go about proposing rules, that they have a lot of input into those rules, which they have had. and i think that that has improved enormously. not to say that i don't still hear isolated instances now and then where it feels to me the coordination could be somewhat better. but i think certainly the leadership at those agencies, at the federal reserve, at the fdic and occ, have been committed to collaborating with the fcpb and understanding that we have distinct but related roles to be integrated, so institutions don't have to face what i regard as a very unfair situations that they would not know how to proceed. i don't think we're hearing that. i tell institutions all the time, let us know about your complaints in this regard so we can fix them, and again, i think there's been tremendous progress over the last three years. >> thank you.

>> thank you, mr. chairman. director cordray, as you know, recently in congress we've been debating the question of whether the nsa should be allowed to access telephone records of americans. and i have been very concerned about the massive data collection that the cfpb has been engaged in. the last congress, as you know, i asked that the cfpb's data collection program be reviewed by the government accountability office. and that gao report established, and i'd just like to confirm the facts with you, but that gao established, as i understand it, that the cfpb has an ongoing collection of up to $600 million credit cards that are being evaluated, the data is being collected on 11 million credit reports, 700,000 auto sales, 29 million mortgages, and 5.5 million private student loans. i actually think that the

numbers are hugher than that but is that in the ballpark? >> i certainly would agree with figures that are set forth in the gao report. they did a very careful evaluation of us over the better part of a year. we worked closely with them. i have nothing to dispute in that report. >> and as you know, in several places, the dodd/frank legislation prohibits the cfpb from collecting personally identifiable information. the cfpb claims it's not doing so, because it is not collecting certain things like the names, social security number and address of the person whose credit card data, for example, they are collecting. could you tell me what data points the cfpb is not collecting on those credit card transactions? >> you mentioned the fact that we have developed a credit card data base. we're working on a national mortgage database, consumer credit panel. in all of those areas, this information, it's really significant to get this, because it's often misunderstood.

this is deidentified, anonemized information as you noted. name, address, social security number, account number, is not included in any of that material. so it's actually pretty uninteresting data from the standpoint of, say, you or i being concerned about our privacy. instead what it does is it gives us a sense of patterns of consumer protection, consumer abuse in the industry. that's what we're looking for. it's like a gdp or unemployment rate analysis. it's not about what you or i do in our daily lives. i'm uninterested in that. >> and you and i have had this conversation before. one of the concerns that i have is that it's easy to say that data has been anonamized and it is easy to de-anamized it. a recent study found that just the dates and locations of four purchases are enough to identify

about 90% of the people in a credit card data set. are you telling me that the information the cfpb collects cannot be de-atomized? >> it is not easy to do that. it would take a lot of time and effort to do that. i don't see it would be worth anybody's wile to do that. that certainly i have no interest in that. i don't think anybody at the bureau does. personally identifiable information is only a problem to us doing our work. it creates all kinds of issues and we try to avoid it as much as possible to avoid making extra work for ourselves on those issues. >> just to get clear on the scope, my understanding is that you're collecting data somewhere around 80% to 90% of all credit cards. is that correct? >> in that one, all the other areas we do sampling. in that one we don't because industry told us it is more efficient and less costly for them to simply do a data dump than to have to organize a representative sample.

and this is consistent with other agencies treatment of the same issues. >> well, because of time, i'm going to move on. i want to continue this conversation. >> that's fine. >> i do believe the protection for americans is not adequate. >> happy to speak to you personally and your staff in your office wherever you'd like. >> the last question i want to get into is the paperwork reduction act designed to ensure the greatest possible public benefit from and maximize the utility of information created, collected, maintained and disseminated by the federal government. and to improve the quality and use of federal information, decision making and so forth. it's my understanding that each of the 1022 orders issued to date by the cfpb which is the orders to collect this data has been sent to fewer than nine companies to avoid the review of the request by the office of management and budget. could you tell me how many time

has the cfpb utilized the exception for reviewing data requests by sending 1022 requests to fewer than ten companies? >> we have utilized it several times and went through the full process several times. that's one way of characterizing what we've done. as we're seeking data, if we can limit the number of institutions so that we don't have to burden other institutions, i assume that's what you would like us to do. it's another version of sampling. so rather than seeking the data from hundreds of institutions, if we can get a representative sample and it's fewer than nine, that's easier for us and easier for the institutions. >> you could clarify for me and maybe can you do it since my time up is, maybe can you do it in a written response. i'd like to know the exact data rather than several times this way and that way. out of all of the data requests you made, how many have avoided the omb review? >> senator reid? >> thank you very much.

i'm told that today is military protection day. it's fitting that you should be here. one of the prouder achievements is in the service of member affairs which is in your organization led by holly petraeus. so thank you for all you're doing to help protect our servicemen and women. the basic legal protection for these young americans and service members goes back to the civil war. enforcement is scattered about. they have civil authority, civil action, banking regulation. but the enforcement is really lax. you pointed out last week when you did a report which indicated that service members continue to report difficult obtaining their service members and civil relief act protection of 6% on loans. the lower going back a long time ago. if you had prior existing debt, if you get anything in the arms

services it's 6%. and i have put legislation in to give authority for enforcement to see if there is background. if congress were to enact this legislation, how would the cfpb be better equipped to protect them from social harm? >> i think it stands to reason senator, if there's more cops on the beat to protect our troops in terms of potential abuses or problems and financial products and services which for them are just a distraction from their ability to focus on the job which is defending and protecting all of us, that that would be a helpful thing. i note that the congress a couple years ago, and i think it was under your urging, did provide enforcement support. i thought that was a positive step forward. we work with partners, particularly the department of justice is active in this area.

again, they only have so many resources. we only have so many resources. if there's ever an area where we should be training and focusing resources on the problem, it's making sure that our service members are treated appropriately and fairly in the financial marketplace so they don't have to worry about those problems. >> thank you very much. and you made reference the military lending act. that was passed in -- for the fiscal year 2007 national defense act. it gives you authority, but it puts the burden on the department of defense. they're trying to do that again. they had a series of regulations that were well intentioned but didn't fully address the problems that face servicemen and women. can you briefly explain what -- how these members remain vulnerable today in anticipation of rules that we hope will be

forthcoming forthcoming. >> i appreciate you have had a very constant and sharp focus on these issues. and you've seen to it that progress moves along in this area. i think we're close to having a new set of rules. i commend the department of defense for the speed with which they've recognized the importance of working on this problem. the difficulty is that military lending act passed in 2007, there was originally a set of rules meant to implement it but they were too narrow and too easily circumvented. this is very much the problem that senator brown pointed out earlier of people being able to swim around the otherwise well intentioned rules and you still can see website after website of online lenders offering loans to service members at triple digit percentages and some are 400, 500, 600% going under the current set of rules which is why congress has directed that this be redone.

the department of defense has taken that very seriously and again, acted with great speed in addressing it. and i believe that very shortly we're going to have a new set of rules and service members will have new important protections that they probably should have had several years ago. >> thank you very much. again, we're all rightfully appreciative of the service that these men and women render the country and we say that repeatedly. but if their rights can't be adequately protected, then the let rhetoric is nice, but it's better to have the access to the rules and protections. so i think you for that. >> a number of the members of the committee can speak to this personally from their own experience from service. so i think it's quite important. >> thank you very much. >> senator vitter. >> thank you, mr. chairman. thank you. like a lot of members and a lot of citizens, i'm really concerned about the vast amounts

of data that cfpb collects on all citizens or related to the financial transactions. i have a proposal to allow any citizen to see what personal identifiable data the cfpb has collected on them at least once a year. would you support that concept? >> so in general, our approach to this is we're not interested in personally identifiable data where we can at all avoid it. it only causes problems for us as an agency in our work. the data we're collecting to be able to monitor the credit card market, mortgage market, issues you'll all ask us from time to time whether laws have

gone too far, whether they've gone far enough. how can we possibly answer the questions if we don't have data on the marketplace? now that is very different from me wanting data on what senator vitter does in individual transactions. we have personally identifiable data in two respects. we have consumer response where consumers give us their data so that we can work on the complaint the same way constituents go to your office and give you data so can you work -- >> apart from complaints, do you collect significantly personally identifiable data? >> no. >> you don't? >> we don't. >> you don't collect any of that. >> we have no reason to do that. >> you don't collect any of that? >> for example, our credit card data, we do not have name. we do not have address. we do the no have social security number or account number. we're not interested in that. >> do you collect it before you scrub it? we asked for the data to be scrubbed before it comes to us wherever possible.

>> who gets it and who scrubs it? >> depends on which database we're talking about. i'd be happy to have a full briefing for you on this. >> so somebody involved in the process has that. >> it is scrubbed before it comes us to. private companies have all of this data. they care very much what we do in our personal transactions and always marketing to us on that. that's where the focus should be. we don't have that data. we don't care about. we're trying to monitor markets as a whole. it's a big difference and it's often misunderstood and misstated by people. so that's what i would say to that. >> so what about these databases, the collection of -- one time collection of 100,000 to 500,000 department advance accounts that contained

deposit account and transaction level data? did you never collect that? >> we've had particular collections from industry in order to work on particular reports. again, we're typically not interested in transaction level data. or individual transactions. >> so what i did reference did include transaction level data? >> again, number of different collections over different times. if you'd like us to have people come to your office and speak very specifically about anything in particular you want to know more about, happy to do it. if it's a problem in your mind, then it's a problem in my mind. >> well there are big problems in my mind and i have seen personally identifiable transaction related data that have been collected. >> you have seen that? how have you seen that? >> i've read about at least three specific databases that you all have collected that contain that, number one. >> give us a chance to brief you and we can speak to this number. >> and number two, there is all

sorts of data you collect that involves that information, at least before it gets to you. would you support citizens being able to see what data is being collected by or because of regulations of cfpb? >> this sounds good in the abstract, but typically the data we're collecting, we can't tell what you citizen is what. you and i don't want us to know that and we do not know that. therefore, we couldn't even answer that question. >> it would only apply to what i'm describing. would you support citizens having access to that to understand what is being collected? >> again, i'd be happy to talk to you about that.

they gave us the information so we could work the problem just as do you the arms of your offices. if it's enforcement or reaction to get relief to people, we need to know who should get the relief. i don't care and don't want to know who an individual is and we typically do not know it. and therefore, we cannot tell an individual anything about their data. we don't know whose data it is. that's the way you should want it and that's the way i want it. >> thank you mr. chairman. >> senator menendez? >> thank you, mr. chairman. with the fifth anniversary of the wall street reform act this month has been a lot of discussion about what the law did well, where there might be room for improvement and what challenges still remain on the financial landscape. and as we look back, i think establishing the consumer protection bureau is one of the cornerstone achievements of the

law. people have a cop on the beat on their side to identify and stop predatory and some deceptive practices. now i fought hard for the creation as a member of the committee as well as many of the protections it is charged with enforcing. such as strong mortgage servicing rules to stop foreclosure abuses and protections to end abusive and deceptive credit card practices. and i also fought hard for any of the laws financial stability and corporate governance and prudence. and while the law is not perfect and some important challenges remain, the last five years have shown that overall there's a lot it got right. and director, the cfpb has been at the forefront of many of the financial gains, which is a testament that work that you and senator warren and the cfpb put in to stand up the agency from scratch and continue the positive development. i want to commend you for being a force for good. there's two areas that i would like to get into with my

questions. one is invasion of the tool track pr visions and some of the kred card reforms they fought for in the 2009 credit card act. i want to talk you to about those. i'm pleased that the bureau made these a priority. while our economy and housing market continue to recover from crisis, there are still many parts of the country struggling with mortgage debt and foreclosure, including my home state of new jersey which has the highest rate of the country of home currently in foreclosure. despite the cfpb's new rules, many homeowners behind in the mortgages continue to face obstacles to obtain modifications that can help. until mortgage services mark applications as complete, homeowners are not available for duel tracking protections which

prohibit a servicer from moving forward with a foreclosure while the homeowner is pursuing lost mitigation. while they scramble to believe pull together document after document, they accumulate additional fees and burdens that make them even more likely to default. some services request documents on a piecemeal basis and request the same documents. making it an infective loss mitigation a pipe dream. do you have concerns that services are intentionally obstructing the loss mitigation process to favor foreclosure? if so, what more can be done to protect consumers? >> we do and i do have concerns about that. for me they go back when i was a state treshasurer and county treasurer in ohio and saw the difficulties that mortgage servicing problems were creating for individual homeowners who really didn't deserve to have that heaped on top of financial distress. when we created our new mortgage

servicing rules which went into effect in january of 2014, we look closely at the consumer complaint line frequently and work to address them. we have further work that we're doing both in enforcement actions. we've had several enforcement actions where this is part of the problem and part of the answer in orders that we had to impose. and also in supervisory work that we're doing with institutions that we highlighted in our last edition. so that all of the industry could know again that this is a focus for us. it is a problem persisting for years. it's one they need to clean up. it is a complex problem. as you noted, different states have different situation that they're in with underwater homeowners or with foreclosure processes that differ dramatically from judicial to nonjudicial foreclosure states. but this has been pretty much a constant across the country. >> i'd like to follow up with

you. >> that's fine. >> finally with the 2009 credit act, we've pleased to show that the actual forms are saving consumers $21 billion a year. in 2013 the bureau released you its own report that found similar successes but also identified market practices that are a concern for consumers. can you give us an update in that regard? >> i can. i will tell you. i go back to the state level. we saw all kinds of complaints people were making about credit cards. this is 2005, 2006. before the card act, before the financial crisis. that market is considerably better today than it was ten years ago. i'd say there are three reasons for that. and i want to give credit where credit is due. i think the card act has done tremendous successes in correcting the late fees universal default, other issues. some of the real problems have

been cleaned up. second, credit card companies themselves have done a better job on customer service. can you see in the j.d. power surveys. the net promotion score index which they used in handling credit card calls from customers has been an enormous shift. putting financial incentives behind the way people handle the calls so they're more consistent with what the customers looking for rather than just trying to get them off the phone. i want to give them credit for that. i would ask them to think about using the forms across their financial products. they know how to do it. they should do it. the third thing is consumers themselves, coming out of the financial crisis, consumers are more responsible about thinking about how to approach the credit card debt. whether to maintain long term revolving credit card debt. what the interest rates are on that. people have been paying down debt. whether you're a consumer managing your own debt, you'll have better experience with the company and marketplace. that to me is one of the success

stories. there are issues that we're concerned about and looking at. deferred interest is an issue of some concern for us. how the rewards programs are advertised, we just want to be careful about that. and the credit carded a -- add-ones have been a particularly problem for me. and i think much of that has been cleaned up. but i would say the credit card industry is a hopeful sign for me that financial institutions when they come under pressure from congress and others and also when they understand the importance of doing it themselves have the ability to clean up their act. i would urge them to consider what they are doing there and how they can do it elsewhere. >> thank you, mr. chairman. >> thank you, mr. chairman. good morning. >> good morning. >> as i'm sure you're aware south carolina has become the automotive giant in the sector of transportation.

i'm very proud of my area. we certainly have seen a lot of jobs created by the manufacturers that depend on dealers in south carolina and around the country being able to sell cars. that's why i'm particularly concerned by the cfpb's 2013 bulletin on indirect auto lending which imposes a one size fits all cookie cutter regulations on lenders and dealers. as senator shelby has already stated, cfpb has no jurisdiction over auto dealers but seems that your bureau is regulating heavily the relationship between lenders and dealers. i'm not as concerned about the dealers or the lenders. i'm really concerned about the consumers in south carolina, whether it's greenville or charleston, who will pay a higher price for their vehicles because of the government's involvement in trying to make things better.

director eliminating the ability to compete for the customer's business will mean that the customer, simply the customer, ultimately pays a higher interest rate. how do we explain that back at home, cfpb's involvement forces some south carolinians to pay higher interest rates on a car note and how does that provide greater consumer protection? >> yeah. so a couple things, senator. thank you for that question. first of all, just understand my background, too, i come from a strong automotive state. i talked to senator brown, you know, gm, ford, chrysler, honda have been very significant presence in that city. when i was the ohio state attorney general, we had to deal with all the issues, first the chrysler and then the general motors bankruptcies which were tremendously burdensome for everybody involved but ultimately came to a good resolve. the result being that we understand the importance of employment in that area,

pensions and health care for people who work in that field. i'm the director of the bureau. the last thing i want to do is things that hamstring important markets like auto lending, mortgage lending and the like. and if i do that, it will be to the detriment of my agency and the american public. we had the hottest auto market in the last several years than we ever had before, i believe in the history of this country. and that's at the same time that the consumer bureau was gathering its wings and coming into existence. i'm pleased about that. i think consumers benefit when they have access to automotive transportation, probably in your area as in mine. if you don't have the ability to get around through a car or truck, you're really in a lot of trouble in your life. so that's important. having said that, we also believe strongly that people should not be subject to higher prices or more onerous terms

based on their ethnic, racial or gender background. the justice department feels strongly about that as well. they're a partner in this work. the bulletin that you described was actually a bulletin that was a pretty straight forward restatement of the law. it wasn't a change in the law several years ago which simply stated that if you're a lender and you have an automotive lending program, you're subject to the equal credit opportunity act that is an undeniable proposition. you need to think carefully about what your program is. >> i hate to interrupt you. i need to go to another question. but i will say there is legislation being promulgated, working its way through the house with a large number of the cfpb members on legislation on this specific topic. i would suggest that members of the cbc are very concerned about discrimination and perhaps your approach to the indirect lending market is inconsistent with the outcome that i think you

sincerely desire to achieve. my other question, in some of the time i have remaining, is on our conversation before we started the panel as it relates to the trade issues. i think senator donnelly and myself submitted a letter in may asking for a grace period, some time so that those good actors in the mortgage business are trying to transition to the new forms would have more time than october to have less liability exposure as they move to the new forms. i would love to hear your response as we talked about earlier. >> thank you for that. we've heard a tremendous amount from congress on both sides of the hill about what we call the know before you owe mortgage rule, which is something congress required us to do. just as a reminder, it's in the

law. i'm required to do this. it's a good thing. it takes a regime that has grown up historically that didn't make a lot of sense where the consume her to get two different forms at the application stage from two different government agencies, hud and the federal reserve. and then two different forms at the closing stage. very confusing to consumers. why am i getting two forms? how do they differ? what am i supposed to take from that? it was impenetrable. we were supposed to reduce that to one form at each stage which we have done in that rule. that's a good thing. there is still pain in the transition. that requirement was in the law five years ago when it was passed. we worked on this very carefully over time. did a lot of consumer testing. very transparent about it. we finalized the rule in november of 2013. we gave a 21-month implementation date. a long implementation date from what we heard from industry. nonetheless, when we get to the end of it some people aren't ready. we heard from you and others in the spring and it was -- it's an

example of the oversight, mr. chairman, you talked about. when we get congressional oversight, i take it seriously. i don't regard myself as able to blow off concerns that people raise to me. if you're raising a concern on behalf of your constituents, they're the people i'm trying to serve as well. so we did in the end -- it was due to an error in our part, but we did back up the implementation date further out in the end of the summer sale season. it is now under consideration to put that in october. a lot of people don't like a date of something like january because when we did our first round of mortgage rules, we were under requirement of time frames from congress, it was january. and there are so many systems change that's they do or systems freezes that they do at the end of the year that is inconvenient. and in specific response to your question, we went out and worked with the other agencies to get

an agreement, which we have, that the early examination of this will be diagnostic and corrected. we don't think people are out there going to be trying to exploit consumers on something like this. they're going to be trying to get it right. and so for the first period which may last many months of the other agencies as we look at this, if we see errors, we'll see what they are and how they should be corrected. we'll not be looking to be punitive toward people. we said that explicitly. i'll say it on the record again to you. that's how it will be. i can tell you that what we said about the mortgage rules two years ago and that is how it has been and nobody has said otherwise or complained and we have taken that to heart here as well. happy to talk further about it. we've been trying to get a fair amount of leeway here and moving forward with an important change that's good for consumers and help them understand the transaction better. >> thank you. >> senator tester? >> thank you, mr. chairman. thank you and ranking member

brown for having this hearing and thank you for being here today, richard. i appreciate what you're doing. and i also want to say, as senator scott did, we appreciate the extension you gave. you did respond to a letter that i and mr. on this committee had signed with senator donnelly. i want to talk about native-americans. it's a different ball game there because of the issues of sovereignty and the issues of consultation. i've had some montana tribes that have been very unhappy with the consultation process. to be fair, i've also heard from an oklahoma bank that you're doing good things. so the question comes up, is the consultation process, is there a policy on what you do and how you do it that applies to every tribe across the country. if that's true, can you give me an idea of what it is?

>> yes. we -- in fact in response to back and forth that you and i on this subject and others from that area of the country in particular but other parts of the country may have a tribe or two, as well, we did put together a policy on consultation. and we formalized that and shared it and got input on it from the leading tribal council. we have since then been requested could we put together an mou that would be more specific about some of the aspects of how this works. and we have -- we worked at that and did develop a draft mou that we have shopped back to the tribes sort of as a whole. i don't want to have to get into having individual consultations with individual tribes because my understanding is there's more than 500 across the country. >> there are. >> we're trying to deal with them as a group. they're very concerned about the

small dollar lending, potential regulations there. we have had two distinct consultations with them on that subject at their request at this point and had a considerable amount of input from them. and of course we're open -- i want to emphasize we try to be as an agency very accessible people at all times to see us and tell us what they're concerned about and what they think. i always feel like that improves our work if we know it and it doesn't help me not to know it. >> agreed. >> i would say that too. i think we've been trying to be fulsome, and i'm happy to hear from you. >> we will try to help where we can help, yeah. appreciate that. early this year, the bureau proposed change to improve rural lending in america. while i think there are things we can keep working on i'm appreciative of what the bureau did and made positive changes,

one of which was expanding the definition of bureau states. under the changes, almost the entire state of montana is considered rural which is correct, by the way. my question is, outside of montana, are you still hearing from folks that think they are in rural areas that the cfpb hasn't defined well. >> by the way i still recall the meeting i had in your office in which you impressed. me -- i said i understand something about rural from parts of ohio which are quite rural. and you said "i don't think you really know what rural means in montana," and you gave me schooling on that. that led in part to our thinking about how to expand this definition. to go back, the federal reserve first proposed a definition of rural under this rule before we came into being as an agency. their definition would have covered 2.2% of the american population which was plausible but somewhat narrow. we looked at it and decided it was too narrow. i looked at maps of ohio at the time. we came out with a different

definition that was more like 9.9% of the population so about quintupled it. even after that people showed me maps of ohio county by county, and senator brown and i could do this in our sleep. there were a bunch of county that were clearly rural in my mind from what i know about them but were not covered under the definition. we of the the need to do it again. one of the thing about the bureau that i appreciate among the strong team there is we want to get it right. if we didn't get it right, we're not going to pretend we did and say we can't change it. we're going to try to fix it. we have a definition of rural that is much broader, as you say, includes pretty much the entire state. covers 22% of the american population whether it's too broad or not, i don't know. it feels appropriate to me. we've had disagreements in the agency over it. they're working to finalize rules on that which we should do by the end of summer. i think for most part they've

been fairly well received. once we hear from people one -- once they see how they work, we'll have more information about it. >> i was very concerned about the information you're collecting. because of the data breach at opm the concern, maybe this data base will be breachable, too. i was encouraged where you're not collecting social security number, names, addresses account numbers. >> right. >> i think we have to be careful as policymakers if we were to pay a bill that releases any personal data that you would have to go and put names addresses, social securities to the data which would take a ton of time and make me concerned about what's going on. >> i really would not like to have to do that. >> thank you very much. thank you, chairman. >> senator kirk? >> director, i want to raise the issue which several people have raised in a bipartisan level of the cost of your building. from what i understand from your

inspector general the total cost which used to be from the office of thrift supervision is $216 million all in. this is a lease facility which you've gutted and are putting in a two-story waterfall and glass staircase. if you look at the number of employees in your bureau, it's 1,459. that would lead to a per-employee cost of headquartering them in washington, d.c., of $148,046 per employee. i would say that's a little -- since this building was way okay with the office of thrift supervision, how come you need $216 million in upgrades of what they already had? >> so several thing. number one -- >> follow up, how does a two-story waterfall help you do your job? >> well, on that one in particular i would say i don't begin to see how it helps us do

our job, and probably we won't end one a waterfall in this building. although, any two-bit shopping mall in america, you can probably find a waterfall somewhere. i think that's been overstated pie people. in any event the office of thrift supervision which had this building before it went defunct in the dodd-frank act had already recognized and had done an audit and recognized that the building was in deep need of fundamental repairs. we're talking about useful -- >> let me interrupt a little bit and follow on the line of senator tester by saying as an ohio attorney general, you certainly would be able to pick up the issue of the bulk collection that you're doing against the american people. as someone who was a reservist in the intelligence community for over 20 years have you taken the specific action, i would ask again, have you taken the specific action to take member of congress out of your data collection and members of the supreme court out of your

data collection? do you see the issue on separation of powers? >> you've kind of piled up two questions that i haven't had a chance to answer. i'd like to go back to the building first if i may. the office of thrift supervision recognized that systems were reaching the end of their useful life -- >> let me get back to my secondary question. and have you made sure that you have not collected the credit card data of supreme court justices? i'll take -- >> we have not collected credit card data on any member of congress or supreme court justice. there would be no purpose to do so. but i don't consider that issue as more important than the privacy of individual consumers across the country where we're not collecting their data either. >> are you sure you have not collected supreme court justice information? >> why on earth would i do that? >> because of the separation of powers -- >> why would i be collecting supreme court justice data? why would i -- >> i assume this scandal is a bit like the nsa scandal.

you have vacuumed up too much, too much power. >> i can't really even follow the question here. >> i think any first-year law student would pick this up separation of powers argument. it gives you the -- the ability to abuse this power and intimidate the court. >> so -- intimidate the court? i don't really follow that at all. we are not doing anything you're hypothesizing, nor would i want to do that, nor would it make sense to do that. all it would do is discredit my agency -- >> i think senator tester picked up on the issue, if you'recollecting all this data. the only purpose is to access it. the problem is as you collect this -- >> no, senator -- not so. >> does -- >> for private sector, the purpose is to access. for us it's to monitor markets. >> the chinese intelligence service have it before you do. now that we've seen on the order of 10 or 200 million people compromised by opm.

the problem is we don't trust you to keep this secure. >> i can see that you don't trust me. i think you're setting out a set of hypotheticals that have nothing to do with anything we're doing. i'd be happy to have our staff brief you more to give you comfort on that score. do you want me to go back to the building, or are we never going to answer that question? >> i would ask why is $148,000 per employee absolutely necessary to your mission? >> okay. those numbers are off. >> they're actually the numbers of your inspector general. >> look, they're talking about thing like other rents they're talking about other services, the construction costs have remained actually fairly consistently constant. we've now let those contracts, and they're coming in under budget. they're fairly consistent with what the otfs opined was necessary six or seven years ago before the cfpb existed. i think this is, again, vastly

overdone. that's my view, but i'm happy to talk further with you about it. >> i would gently suggest that you probably ought to scrub the data base and make sure you're not collecting intel on members of the supreme court or congress. >> i'll be glad to look at that. i can't imagine we're doing. that and if we were doing that -- >> i think that would reassure us all. make sure that -- >> okay. >> the chinese don't have it before you do. >> okay. we'll look to give you reassurance on that point. >> senator warren? >> thank you mr. chairman. so since it's opened its doors four years ago, the cfpb has had a consumer complaint hotline where consumers can call in, go on line, they can lodge a complaint about a financial product or service. that's what consumers have been doing. they come in and complain about sketchy fees on a checking account, errors on a credit report, harassment by a